As we began discussing in the last post, it is important for the party who stays in the martial home after a divorce to refinance the loan under his or her name only. This way, the party who moves out can no longer held responsible for the mortgage.

It's also important that the person staying in the home is the one to refinance because, by law, lenders are only required to work with the person named on the loan.

However, refinancing a mortgage is not always easy, especially when the mortgage exceeds the home value. The spouse staying in the home might not have good enough credit or income on his or her own to qualify for refinancing.

In this situation, the person has a few options to consider:

  1. Sign up for a one-year waiting period during which alimony payments can be recorded as income for qualification purposes;
  2. Try to find a more flexible loan provider;
  3. Look into the federal government's Home Affordable Refinance Program (HARP), under which homeowners with negative equity can refinance; or
  4. Find a co-signer.

The co-singer option is one that many individuals in this situation choose. Because there is no benefit for the co-signer, it usually ends up being a parent or a close friend or relative. By co-signing, the person agrees to take responsibility if mortgage payments are missed.

The party staying in the house also needs to come to terms with the fact that the household income will likely change following the divorce, and it may no longer be possible to afford the mortgage, utilities and upkeep of the home.

An experienced family law attorney can help with these decisions and others during a divorce.

Source: Nasdaq, "How to divorce your mortgage," Marcie Geffner, Jan. 26, 2012