When a California married couple purchases a house together, both of their names are usually included on the mortgage. If the couple goes through a divorce before the mortgage is paid off, they could be linked by their mortgage document for many years to come, because altering a mortgage can be difficult.
Though divorced spouses may give their property rights away with a quitclaim deed, they won’t be removed from their mortgage obligation until it is refinanced. To get the mortgage refinanced with just one person’s name on it, the ex-spouse that gets to keep the marital home will have to qualify for a new loan with just a single income.
Divorced spouses who earn enough money may be able to get their mortgage refinanced. However, there are many who cannot pass the lender’s eligibility test once their ex-spouse’s income is not included with their own. A person who does qualify for refinancing may be asked to make a bigger down payment. In some cases the interest rate will not be as favorable as it was on the earlier mortgage. These issues can make home ownership a significant financial burden after a divorce.
California is a community property state, and thus a judge will divide marital assets and debts equally during the property division phase of the process. Of course, a family home can not literally be divided in half, so the estranged couple can often, with the assistance of their respective family law attorneys, negotiate a settlement agreement that deals with this issue and which then can be presented to the court for its approval.