Ask Terry Questions Divorce in Illinois — house/mortgage?

Divorce in Illinois — house/mortgage?

By Terry Savage on September 20, 2023 | Housing / Real Estate

My daughter is going through a divorce and needs to refinance her house. Her present mortgage is 3.5% and current mortgage rates are 7.0+%. Is there some way to avoid this increase just to get her husband’s name off the mortgage? Thank you

Terry Says

That is a very tough situation! I assume she gets the house in the deal. If you change the title to the house, it will trigger the need to refinance. Removing his income might even make it impossible for her to get a mortgage, depending on the equity in the home and her income as a single.

I just had a creative idea! There is no tax or mortgage implication to changing the title into a Revocable Living Trust. It could be just the “Smith Family Trust.”
Then, she could remove him from the trust as a beneficiary or a trustee. She would remain the only trustee — and in complete control of the property. But he would still be signer on the mortgage and that liability wouldn’t change. He would have to agree to that — at least until she could refinance in a few years at a lower rate.

This might be too clever! You don’t want to be accused of bank fraud! So please do check with an attorney before attempting this.



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