My wife and I are in the process of a mutual no-contest divorce. She moved out in October and stopped contributing to the mortgage. Our divorce proceedings through LegalZoom indicate that I will retain the house and be responsible for the mortgage payment and associated debt. However, as far as Bank of America is concerned, her name is still on the mortgage (30 year, 5% fixed, FHA) and, I assume, is still financially liable in the end.
1) Assuming a 3rd party would eventually buy her share out, how does one calculate the equity she earned while living in the house from Nov 2009 to Oct 2011?
2) Until that happens, I assume it is still a good idea to hold life insurance policies in each other's names as co-owners of the house - correct? We currently hold 100k spousal policies through work.Because it was purchased so recently (and luckily, post real estate bubble), the house is underwater at the moment, so selling is not an option for either of us. Additionally, I have been informed that she would likely need to file a "quit claim" deed forgoing her legal rights to the house in order to avoid repaying the IRS her share ($4k) of the $8k first-time home-buyer's credit we received in tax year 2009. Taking the original info above into account, from my research, this essentially relieves her of her rights to be on the property but does not excuse her from the financial obligation through the bank. Is this correct?