For many married couples in Illinois who are also homeowners, their family home commonly represents their most significant financial asset. At the same time, the home loan that is associated with the property generally represents a couple’s most significant financial liability. When embroiled in the midst of a divorce, one of the spouses may advocate for their right to keep the family’s house after the divorce is over. However, any agreement about a house should not be made without also considering the mortgage.
As explained by Bankrate, the spouse who wants to keep the home should carefully assess their true ability to afford the home after their divorce. The person should evaluate their ability not only to make mortgage payments but also to keep up on all maintenance, repairs, taxes and insurance costs. In addition, the other spouse should require that their name be removed from the mortgage to eliminate their financial liability for the home.
According to The Mortgage Reports, a home lender considers anyone listed on a mortgage account responsible for the debt regardless of the names on the property’s title. For this reason, anyone wishing to keep a home after a divorce should ideally obtain a new mortgage in their name only. A person often experiences a drop in income and credit score after a divorce. These realities may make it hard to qualify for a new or refinanced mortgage.
Some mortgage programs allow borrowers to remove one person’s name from the loan. These programs require the remaining borrower to meet certain criteria in order to qualify for the revised loan. There often is an additional cost for refinancing. Please also remember that the first $250,000.00 of equity is free from capital gains tax for a sole owner. However, the equity comes from the cost of sale plus any improvements which forms the cost basis on the house. The equity is figured out by deducting that basis from the sales cost. The tax is calculated from the amount of equity and not the sales price.