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Can I keep my house in a divorce?

Divorcing Colorado residents should carefully evaluate the pros and cons of keeping their family home before making a final decision.

When getting divorced, residents in Colorado often wrestle with the decision about what they should do with their family home. This is understandable for many reasons including the reality that many emotions tend to be attached to a house. In addition, a house may be the biggest financial asset that people have, making the choice about how to handle this in a divorce highly critical to the overall outcome of the settlement.

The urge to keep a home may backfire

The Mortgage Reports indicates that if both spouses are listed on the mortgage, they both remain liable for that debt regardless of what terms are listed in a divorce decree. That means that if one spouse keeps the house and is responsible for making the payments but falls behind on those payments, the person who leaves the house could be on the hook for the loan. Any credit damage caused by one person's failure to stay up on payments is also shared by both parties.

Short sale may be better than no sale

As explained by Time Money, a couple may think that a quit claim deed coupled with a clearly written divorce decree provides protection against mortgage problems but that is not so. A quit claim deed only takes away one person's rights to the property but a joint mortgage still leaves them responsible for the debt. This is why many recommend selling a home in a divorce even if it means doing so via a short sale.

Considering refinancing options

When one spouse is intent on keeping a home, Forbes recommends having the mortgage refinanced into that person's name only. This is the only way to truly protect the other spouse. There are other benefits to this as well.

A refinanced mortgage may give the debtor the opportunity to take cash out to help pay other debts that may be incurred as part of the divorce. The homeowner may also be able to secure a lower interest rate and potentially even a lower monthly payment. These things may provide another particular benefit to a newly divorced person who may need to adjust to life with an income lower that what they have been used to when they were married.

Making the right decision

When reviewing the full financial picture involved in a divorce, people in Colorado should always talk to an attorney. This will give them the best ability to understand the ramifications of their final divorce settlement decisions.