Great, but what if that’s not possible? I’m still financially responsible for the repayment of the loan, and I’m fine with that responsibility. But my ex-spouse continues to threaten and harass me with legal and contempt charges because I have not removed his name from the loan. He claims that it affects his credit, and in his mind I didn’t fulfill all the requirements stated in the divorce decree. Is my ex-spouse correct?
A: Yes, your ex-spouse is correct. You mentioned in your letter that your divorce decree made you, and only you, responsible for the loan on the home. You also stated that the decree requires you to refinance the loan and take his name off the loan. While you’re candid in acknowledging your obligation to pay the debt, you’re quick to say that you might not be able to refinance or pay off the debt.
Try looking at it from your ex-spouse’s perspective. Having his name on your equity loan means that loan (with whatever payment history it carries) is still listed on his credit history and reflects on his credit score. If you don’t pay on time, then his credit score will take a hit and possibly prevent him from securing his own mortgage. And just being obligated to repay the full amount of the home equity loan (whatever is left) may mean he wouldn’t qualify for his own home loan, preventing him from buying a property.
In addition to the financial issues, there's the emotional tie to being attached to a debt for which he no longer benefits (by living in a house that belongs to you). And, frankly, he's still attached to you financially, which he may no longer want.
He has every right to demand that you refinance the property.
On the other side, we realize there could be extenuating circumstances on your end making it hard for you to refinance. Sometimes the person who keeps the home in a divorce doesn’t have sufficient income to refinance the mortgage. In other instances, the spouse has lost his or her job and can’t refinance the debt. And there are times when the value of the home has declined, making it hard to refinance the loan with the amount of equity remaining.
That doesn't mean you can't try, even if it costs you more because the new loan carries a higher interest rate or extends the term of the loan.
Here’s where you are: Your ex-spouse wants his name off the home equity loan. You are legally obligated to find a way to do just that (courtesy of your divorce decree). So either refinance the loan or sell the property.
Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate lawyer. Contact Ilyce and Sam through her website, ThinkGlink.com.