Illinois couples who own a home and are considering divorce may need to think about how they want to divide up the house and whether either of them will try to purchase a new house soon. Purchasing a house before a separation or divorce is official may cause problems. Both spouses will be considered to have an interest in the house unless the one not involved in the purchase signs a quitclaim deed releasing that interest.
If one individual is awarded the house, the other remains on the loan until the house is refinanced or sold. A problem can arise if the individual with the house does not get approved for a refinance. This means that the other spouse will still have the loan on their credit report despite having no responsibility for the house.
Another problem may occur in refinancing if the value of the house has decreased since its purchase. Generally, one spouse buys out the other in a refinance, but in this case, only a percentage of the funds may be available. Sometimes, owners will accept gift funds from a relative in order to make up for the lost equity.
Keeping negotiations amicable is important for ensuring future financial stability and successful mortgage applications later. Couples who remain amicable may be able to complete the process of property division sooner. Individuals should also make an effort to review credit reports regularly. Creditors may need to be contacted directly about assigning marital debts to the right person. Keeping a copy of the divorce decree is also a good idea as it may be needed years later when itemizing property for a lender.
Source: Credit.com, “How to Divide Your House in a Divorce“, Scott Sheldon, July 09, 2014
