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Should I let my spouse keep the house?

Divorcing spouses in New Jersey should understand how to protect themselves against potential financial problems if they agree to let their spouse keep the family home.

For many divorcing couples in New Jersey, their family home may well be the single biggest asset in their marital estate. This is one of the reasons that some people work very hard to keep their homes when they get divorced.

In addition to the financial significance of a house, homeowners tend to assign a high rate of emotional value to their residence. This can be especially true if the couple has children that they have raised there together. Keeping a home may make a parent feel good because it allows them to maintain something stable in their children's lives when the parents get divorced.

However, before agreeing to let one spouse keep a family home, there are serious financial realities that need to be addressed.

Mortgages and homes are separate entities

In the eyes of a mortgage lender, a home loan and the associated home are truly two separate things. As explained by The Mortgage Reports, this means that even if one spouse signs over their portion of ownership via a quit claim deed, that person may still be considered financially liable for the mortgage if the original joint loan remains intact.

Refinancing should be a requirement

Bankrate recommends that any person willing to let their spouse keep the house require that the other party first obtain a new mortgage in their name only. This is the only surefire way for the non-owning party to alleviate themselves of financial responsibility.

If this does not happen and the person who keeps the house ever misses any payments or fails to make a payment at all, both people's credit reports will take the hit. Similarly, if a home goes into foreclosure, both people on the loan will feel the negative effects on their credit reports.

Divorce decrees offer only limited protection

If a divorce decree stipulates one person is liable for a home and its costs, that may still not protect a person against collection from a bank if the mortgage has their name on it.

Taxes may impact a final decision

In addition to future credit or collection problems, homeowners should carefully review the tax implications of selling a home or allowing one person to keep it, potentially in exchange for other assets.

These are just some of the nuances involved when homeowners get divorced. People facing these choices should always work with an experienced family law attorney in New Jersey so they have a full view of the factors to consider when needing to protect themselves.