Your Mortgage During Divorce

 

If you're going through a divorce, you're probably wondering what will happen to your mortgage. Here's a look at how your mortgage may be affected.

If you and your spouse own a home together, one of the first things you'll need to do is figure out what to do with the house. You may decide to sell the home and split the proceeds, or one of you may keep the home and buy out the other's share.

If you decide to keep the home, you'll need to figure out how to finance it. If you can't afford the mortgage on your own, you may need to refinance the loan in your own name.

Alternatively, you may be able to get a loan from a family member or friend to help with the down payment.

Another option is to sell the home and use the proceeds to pay off the mortgage. This may be the best option if you can't afford the mortgage on your own or if you're not sure what you'll do with the property after the divorce.

If you are just beginning the divorce process or you haven’t discussed your mortgage yet, then there are a few questions that you need to be asking:

  • Do either of us want to keep the house?

  • Should we sell the house?

  • What happens if we both want to keep the house?

  • Can I afford to maintain the mortgage alone?

  • Can I refinance and keep the mortgage without my spouse?

  • What if my spouse wants to keep the house? How can I be removed from the mortgage?

Regardless of what your plans or negotiations have looked like so far in the proceedings, making sure that you have considered all your available options and have strategized a Plan A and a Plan B for handling your mortgage is the best forward-thinking action you can take for yourself.

Whatever you decide to do with the house, it's important to discuss your options with a financial advisor or attorney to make sure you're making the best decision for your situation. If you’re currently going through a divorce and you’d like to hear more about your options or discuss the process of refinancing so you can remove your partner from your mortgage, use the link below to reach out and I’ll be happy to schedule an introductory call with you.

 

Frequently Asked Questions

 

  • If both individuals applied for a loan at inception then they are still legally bound by their agreement; even after separation or dissolution - unless one party was awarded primary residence status through court proceedings (which would allow them greater flexibility).

  • If you and your spouse have agreed that one of you will keep the house and the other will be removed from the mortgage, then you’ll need to go through a refinancing process. During this time, the spouse wanting to maintain the home can fully take over the mortgage. But make sure you’ve discussed this path with a reputable mortgage lender.

  • Typically we see one of three scenarios playing out during this process. The first is that the home is sold and any profits from the sale are split according to the divorce decree. The second is that refinancing takes place in which one spouse takes full responsibility for the mortgage while the other is removed from the mortgage. The third option is typically involved when there is alimony or child support involved in the process. In this situation, one spouse may continue to reside within the residence and rely on monetary support from the other to continue making mortgage payments.

  • If you decide to apply for a mortgage while you’re doing through a divorce, you’ll need to make sure that your individual finances are in order, that you have the resources to successfully manage your mortgage payments, and that you’ve discussed this with a mortgage lender AND your attorney. You may need to ask your spouse (prior to a finalized divorce decree) to sign a Quitclaim Deed.

  • The quitclaim deed is a very fast way to remove one borrower from the mortgage. Once it’s signed and recorded, that spouse no longer has any responsibility for their home--and neither does anyone else! This type of change does require approval from your lender though- so make sure you know what they'll need before going through with anything like this.

 

Step by Step Guide to Managing your
Mortgage During a Divorce

#1 - Consider all your options. Make sure that you’ve fully discussed any and all options available to you with your attorney and trusted mortgage lender.

#2 - Have a plan in place. Whether you’ve already spoken with your spouse and his or her attorney, make sure that you know what outcome you would prefer. Do you want to keep the residence, sign it over to your spouse, or sell the house and split any profits? Knowing this in advance will help you make decisions as you move forward.

#3 - If you are selling the residence or signing it over to your spouse, do you need to apply for a new mortgage for your new residence? If so, take the time to ensure that your personal finances are in order and speak with your attorney about the appropriate timing for purchasing a new home.

#4 - Don’t be afraid to ask questions. This process is difficult, even when it’s uncontested. So seek out as many resources as you need to have a solid understanding of the process. Partner with a mortgage lender that you feel comfortable with; one who will answer your questions in a timely manner and take the time to help you understand your options and choose the best fit for you.

 

Assess Your Options

Going through a divorce is never easy, but understanding your options when it comes to your mortgage can help make the process a little bit easier. Work with a financial advisor or attorney to figure out the best way to handle your mortgage during a divorce, and be sure to stay on top of your payments to avoid any issues down the road.