What happens to the mortgage in a divorce?
Having to consider breaking up the mortgage after the marriage breaks up is a monumental decision when emotions are already at an all time high. Divorces are tough. They are tough emotionally. Divorces are tough legally. They are tough financially. One of the many issues faced during a divorce is what to do with real estate.
Breaking Up the Mortgage After the Marriage Breaks Up
Making this decision prior to finalizing your divorce ensures both you and your ex set out on this new chapter with a solid financial foundation.
There are several options for handling the mortgage and property in the case of divorce. It’s always important to discuss your personal situation with a professional, so you’re making an informed decision that offers you the best outcome.
Option 1 – Selling your home and splitting the profit.
This is usually the easiest way to break up the mortgage and property from a legal and financial viewpoint. On the emotional front, this isn’t always the easiest especially if you have fond memories tied to your home – like raising your children there.
Option 2 – You or your ex refinance the home.
For this option, one of you would need to be able to refinance the home under your own name. This means you or your ex would need to be able to qualify for a mortgage on your own.
If you’d like to keep the home and refinance, there are some things you should consider before making your final decision. Will you and the property itself be eligible for a refinance? Can you afford to make the monthly mortgage payments? Are you prepared to handle the maintenance on the home? If something big breaks, will you be able to get it fixed?
There are many specific mortgage guidelines for refinancing your home like qualifying income, property value, and the current debt on the house. The first step is to contact a local mortgage lender who will be able to help you determine whether you can qualify to refinance the home on your own.
If you are not the one staying in the house, it is crucial that your ex acquires a new mortgage without your name on the loan. While it’s not advised to trust that your ex would make the payments on a loan with both your names tied to it, there are several other considerations.
By having your name still on the loan for your former home, you will likely run into issues with renting or buying a new home for yourself. If your name is still on the loan, you are still seen as having that debt.
Divorce is messy, and it can be complicated. There will be situations where neither of the options above will work, and an experienced, local mortgage professional will make sure that you and your assets are protected.