Perhaps the single biggest mistake people make after a divorce is not separating joint debts they have with their ex-spouse. Quite often, this includes refinancing a mortgage. While it may seem like you can relax once the divorce is “final”, you cannot put this off or forget to do it.
The most common reasons I hear for not refinancing a mortgage after a divorce include:
- “My ex doesn’t care, so I haven’t gotten around to it.”
- “I don’t want to cause any problems and force my ex to do it now.”
- “Rates are a little higher, so it is not worth it right now.”
Trust me on this:
- Your ex-spouse is not “fine with it”. They are either not telling you or they do not understand the risks.
- The financial and legal risk to you is far greater than any “problems” you might cause.
- Waiting can cost you thousands more for years to come than a slightly higher rate today.
The 3 Biggest Risks of Not Refinancing Include:
1.Your credit could be ruined costing you thousands– The whole point of including a refinance in the final decree is that joint debt creates a lot of problems. First, both spouses are still fully liable for the entire loan balance tying them together financially for years. Second, the costs of poor credit from a single missed payment can be thousands of dollars. Finally, the result of a foreclosure could even cost someone their livelihood depending on their job.
2. You could be forced to refinance at a worse time – If your ex-spouse’s situation changes and the loan becomes a financial issue, they realize the risk, or if they want to use it as leverage against you, they can petition the court for enforcement. This would require you to explain to the judge why you violated the court order. In the end, you could easily wind up with the judge forcing you to refinance immediately regardless of rates at that time.
3. You could be found in contempt of court – Contempt of court is any willful disobedience or disregard of a court order. If your final decree states that one of you will refinance the house loan, not doing so violates a court order. If a judge finds you in contempt of court, you could be subject to fines and even jail time on top of being forced to refinance at a bad time.
Divorce is serious. To protect yourself and your family, you must do what is required of you in the final decree even if it is not convenient, even when you don’t want to cause any problems, and even if it costs you some money. Not doing so will be far less convenient, cause far more problems, and cost you far more money. Trust me!