How Student Loan Debt Effects the Mortgage in Divorce
We have all seen many parents who have their own student loan debt or have co-signed student loans for their children. Mandating which spouse will be responsible for making those student loan payments in the divorce settlement agreements should be worded carefully to avoid any type of language traps.
Let’s assume that Mary co-signed for $50,000 in student loans for her son. The divorce settlement agreement states that Mary’s ex-husband, Sam, will be responsible for future educational expenses for their son. Mary’s understanding is that Sam will be responsible for making the payments on the existing $50,000 of student debt. Even if Sam’s interpretation is the same, from a mortgage perspective Mary will need to include the monthly payments for the student debt on her mortgage application because the divorce settlement agreement does not specify the existing debt.
In order to avoid the $50,000 of student debt negatively affecting Mary’s debt to income ratios when obtaining new mortgage financing, the divorce settlement agreement needs to specifically state that Sam will assume the responsibility of making the payment on the existing student debt including account numbers and specific loan amounts.
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