One common issue couples face during a divorce is who gets to keep the house. Some couples will just sell their house and split the proceeds, naturally, but in other cases, one person wants to take over as the sole owner and keep the house.
When they do this, there is no legal requirement to refinance the mortgage. Technically, two people could remain on the same mortgage together, even though they are divorced. The mortgage lender is not worried about their marital status.
But in many cases, couples do decide that the person who keeps the house needs to refinance because that removes the other person’s liability.
Missing future payments
From a financial perspective, the issue is that a former spouse who is still on the mortgage paperwork could theoretically be responsible for those payments. If their ex began to miss monthly mortgage payments five years after the divorce was finalized, for example, the lender could still contact that person to request payment. They are still responsible, and it could still have an impact on their credit score.
As such, even if their ex promises to make all the payments, that person may say that a refinance is necessary. They want to be unequivocally removed from the documentation so that it is clear they do not own the property and have no responsibility to make any mortgage payments in the future.
This helps demonstrate how complicated it can be to divide certain assets, even if things initially seem straightforward. During a divorce, it is imperative that couples understand all of their legal rights and the options at their disposal.