Picture this, the sun setting and a full moon slowly rising over the ocean, a warm ocean breeze gently rustles the palm fronds on a palm tree above two young lovers. They watch the sunset and moon rise in tranquil silence, holding each other’s hands and both believe they will be together for as long as they live. Now, if I could put a sound effect into this beautiful scene at this exact moment it would be a record being scratched across a turntable and a huge neon sign would light up with the slogan “life happens” and crash right in front of our two lovers.
What is the point of imagining a peaceful ocean scene and interrupting it with an obnoxious sound effect and jaded slogan? The point is, events in life will happen that is going to test us and we can either let those events define who we are or we can define who we are by our response to those tests life throws at us.
I would like to briefly explain what happens when a loving couple calls it quits and a home loan is involved in the divorce.
The following is a true story, names have been changed to protect privacy and the story has been paraphrased.
Once upon a time, Jack and Jill fell in love, got married and bought a house. Some time passed and Jill said, “I want a divorce!” Jack replies “Fine, I do too.” Jill got a lawyer and said, “sign a quitclaim deed so I get the house and you can keep the truck.” Jack said in a typical macho manner “Whatever, fine, I’ll sign it. Just leave me alone!” Jack thought that by signing a quitclaim deed he would no longer have to worry about the house and is free to go where the wind takes him. What Jack found out was that he no longer had any legal claim to the home. In other words, he was removed from the title, but signing a quitclaim deed did not remove Jack from the loan. In other words, should Jill decide to stop paying the mortgage, the bank could still go after Jack even though he was no longer on the title! This scenario is actually what happened to a friend of mine. Except he found this out the hard way when he tried to buy a house. He was told he could not qualify because he was still on the previous loan. He had assumed that by signing a quitclaim deed, he was no longer liable for anything, and thus free to start over somewhere else.
Jack did luck out because there was a clause in his divorce that stated his ex-wife was required to either sell or refinance the property to remove Jacks name from the loan. Of course, it was a 3-year time limit and Jack had tried to buy a house only a year after his divorce.
How do we remedy this situation? The best way is to have your spouse refinance or sell the property. An FYI, I have yet to see a bank remove an ex-spouse from the loan liability. By refinancing or selling the property your name is then removed from the loan and you are no longer liable for the loan or on the title any longer.
If you are ever faced with a divorce my best advice is to speak with an attorney and if you have questions about refinancing a loan, speak with a mortgage professional. Both will be able to keep you out of trouble as far as divorce and mortgages go. Because you may meet the love of your life and spend the rest of your lives together but in case you kiss a frog and they turn out to be just a frog, realize life is not over, others have been through it and just tuck this little post away in case you are ever faced with a divorce and the former love of your life wants you to sign a quitclaim deed.