Handling Your Mortgage During Divorce

Divorce can be a chaotic and sensitive situation. It can also have a huge impact on your finances. One of the biggest assets couples share is their home mortgage. Managing your mortgage properly in the divorce will help you and your ex go your separate ways on the right foot financially. Depending on how the property was financed and titled, options are available. The more quarrelsome the divorce, the harder it can be to agree on what to do with your house and mortgage. Here are possible approaches and outcomes to consider.

Refinance

If you don’t want to move out of your home and can afford the mortgage, the simplest option could be to refinance the mortgage and leave only one person’s name on the loan. In order to do this, they will need to qualify for the refinance with just their income. After the refinance closes, only the person whose name is on the mortgage would be responsible for making the monthly payments. You could then take the name of the person who won’t be making the mortgage payments off the title of the home. If needed, use a cash-out refinance to pay out the portion of equity due the other person involved.

Sell The House

Selling the home is another option. You and your spouse would agree to place the home on the market and then split the profits when it sells. You would still need to determine how mortgage payments are paid before the sale closes. This may not be the best option if you owe more than the home is worth or if the market is weak. In this case, if you can agree with your ex to rent out the property and continue to pay the mortgage, you can buy some time and sell later. If neither spouse can afford the mortgage on their own, they may have no other option than to sell. It may be in everyone’s best interest to sell, pay off the mortgage, collect their share of the net proceeds, and start fresh.

Keep The Home And Mortgage

If you’re not willing or able to sell or refinance your home, your other option is to keep the home and the mortgage. Both parties remain on the loan and are responsible for payments. This requires specific documentation in the divorce agreement about who will make the mortgage payments each month. Your agreement could state that your ex will pay the mortgage, even though you and your children will be the ones living in the home. The agreement could also state that you and your former partner will pay half of the mortgage each month. It’s important to remember that this option can lead to missed payments if your ex does not abide by the agreement. When your name remains on the loan, your lender considers you equally responsible for making the payments each month. With that, your credit score is also affected if your ex misses a payment. For this reason, a shared mortgage after a divorce might only work in cordial divorces.

To learn more about your mortgage options when going through a divorce, contact us today!