By Kara Johnson | Mortgage Loan
Divorce is painful, complicated and often messy. And when there’s a mortgage loan involved? That makes life is even more complicated for spouses who are separating.
Ideally, spouses either agree to sell their home or refinance their mortgage so that only one person’s name is on it. That former spouse is then responsible for making the mortgage payments each month.
Unfortunately, this idea isn’t always attainable. Often, one spouse will remain in the home. The divorce agreement will then spell out who is responsible for paying the mortgage.
This can lead to serious problems: What if the spouse who lives outside the home is supposed to pay the mortgage but stops doing so? This will cause the other spouse’s credit to plummet. This spouse’s name remains on the mortgage, so missed payments will drop this owner’s credit score just as severely as it will the spouse’s who was supposed to pay.
“A jointly acquired home loan has the unfortunate potential to become a disaster for your credit during a divorce,” said Michelle Black, president of Hope4USA, a credit-counseling service in Charlotte, North Carolina. “Your mortgage lender will not care about your divorce decree. Your divorce decree will in no way resolve you of responsibility for a jointly acquired mortgage loan.”
The unfortunate truth? When it comes to divorce and mortgage loans, you can take safeguards to protect your credit. But you can never guarantee that the mistakes of your former spouse won’t drag down your credit score, too.