One of the most challenging issues facing a couple desiring to separate is dealing with a joint mortgage. In the United States, the most significant investment the typical married couple makes during the course of their relationship is the purchase of a home. Consequently, their main financial obligation is the joint home mortgage loan.
Legal Separation Agreement
Petition the court to grant you and your spouse a legal separation. Many couples who find themselves confronting marital issues physically separate (and consider themselves separated) although they do not formalize the status of their relationship with an appropriate order from the court. The family courts (or divorce courts) in states across the country have the ability to grant legal separations in certain circumstances.
Draft a legal separation agreement that specifically delineates which spouse will be responsible for particular debts. Include in this agreement a provision as to how the outstanding joint mortgage payments are to be made during the term of the legal separation. Two approaches can be taken in this regard. The agreement can call for one spouse to be responsible for paying the mortgage. In the alternative, the agreement can establish that both spouses will pay for part of the monthly mortgage obligation.
When the legal separation agreement is signed by both parties, it is approved by the judge and filed with the court. If a spouse fails to honor the terms of the agreement in regard to the joint mortgage, the court can hold that person in contempt and impose sanctions on him.
Buying out a spouse's interest in the real estate is another option that is available to a couple intent on obtaining a marital separation. Through this process, the spouses agree that the equitable interest of one of the spouses in the real estate will be transferred to the other spouse.
A number of options can be used to reach this result. First, if there is cash available and owned by both spouses, a proportional amount of that cash can be set aside to the spouse who wants to divest her ownership interest in the real estate. The title can be transferred from joint ownership to sole ownership in the name of the spouse who retains the interest in the property. Another course is to agree that one spouse will retain possession of the home and be responsible for paying the mortgage loan. The parties will further agree that the property will be put up for sale at a specific date. The proceeds from that sale are then divided in a manner agreed to between the parties.
Keep in mind that in the vast majority of cases none of these agreements will alter the legal obligation both parties have under the terms and conditions of the preexisting mortgage loan. The mortgage lender will continue to hold both parties responsible for the outstanding home mortgage loan.
Negotiate a new home mortgage loan agreement with the lender. There are unique instances in which a home mortgage lender is willing to negotiate a new loan agreement including only one of the spouses.
If one of the spouses clearly is the individual with a reliable and steady income as well as a good credit history, the lender can be approached with a proposal from the spouses for a new or renegotiated mortgage loan. The objective is to obtain revised or new financing in which the spouse with the financial wherewithal becomes the sole borrower.
As part of this process, the spouse being relieved of an obligation under an existing mortgage loan will also lose any interest in the real estate and will be removed from the title to the property.