How can a spouse protect their credit if they must remain on a mortgage with their ex-spouse?

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How can a spouse protect their credit if they must remain on a mortgage with their ex-spouse?

My wife wanted to keep the house. I gave it to her (will do with a quit claim deed) and I will take my equity from the retirement plan. The loan note is in my name and I asked her to refinance the remaining 100K balance. Gave her 9 months to do the refinance and she will be getting $2000 alimony per month. To protect myself I added a line that states that the house should be sold if she fails to refinance. She won’t sign the settlement if this line is there. Loan is not assumable and 2 minors are at home. What can I do to protect myself and my credit in case she can’t refinance?

Asked on February 10, 2011 under Family Law, Florida

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

There is nothing legally you can do to protect yourself in the situation you describe. If the note is in your name and it is not paid, then it will be reported against your credit--and you can also be sued by the bank for defaulting on a loan. She has no exposure to it (other than losing the house, if it is foreclose) since you are the one on the note.

Look for some other way to carry out this plan. For example, could you immediately sell the house to her, even at a veryy favorable rate? That's in essence what she'd be doing--buying the house--ultimately if she's going to refinance, so in principal she should not object. If she does not at present have the equity or ability to get a mortgage, could you rent to her (including "rent to own") until she in such a position, giving her a guaranty you'll sell to her when she's ready? (Though put some outer limit--2 years? 3?--on it so it's not an open-ended committment.) The one thing you don't want to do is simply give her the house--i.e. the asset and benefits--while you keep the obligations and risk. Speak with a real estate attorney about different ways you may be able to effectuate this and explore options that will protect you better.


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