Divorce and Finances

Divorce and Your Mortgage: What Are Your Options?

Divorce brings about a host of changes to your life and your finances. If you jointly own your home and are unsure of how to handle a mortgage after divorce, you may want to consider some helpful options.

Options for Handling Your Mortgage After Divorce

Every couple is optimistic that their marriage will outlast their 30-year mortgage, but unfortunately, this isn't always the case. If you and your spouse don't have any children, then dividing up your assets is likely to be the biggest obstacle to a swift and amicable divorce agreement. Divorce and property laws vary from state to state, so depending on where you reside, a spouse may be entitled to half of the shared home even if their name isn't on the deed or the mortgage agreement.

Don't let your divorce wreak additional havoc on your family finances. An experienced divorce attorney can help guide you through the finer points of who is entitled to what during a divorce and advise you for the duration of your divorce proceedings. If you're exploring options for dealing with your mortgage during your divorce, here are three considerations.

  • Selling Your Home

    The simplest option is often to sell your joint asset, split the equity, and move on with your lives. At that point, you're both free to apply for new home loans or rental agreements individually, without your old mortgage weighing heavily against you. Of course, this option gets a lot more complicated if you don't actually stand to profit from your home. In this case, your home becomes more of a liability than an ass et. If you're unlikely to be able to sell your home for anything close to what you paid for it, talk to your mortgage lender about your options.

  • Refinancing Your Home

    If you and your soon-to-be ex can agree on who gets the house, it's a good idea to simply refinance the mortgage in that person's name only. As with any home loan, that person will need sufficient credit and income to be eligible for a new home loan agreement. A “mortgage assumption” is a similar, and possibly simpler, option that some select lenders offer, so get the facts. If your home loan was issued by the VA, FHA, or USDA, then a mortgage assumption may be a viable option for you.

  • Keeping Your Home in the Family

    If there are children to consider, and you can afford mortgage payments and/or rent for two properties, you might want to consider letting your ex and children live in your old family home long-term while you continue to make payments, or at least until the children have graduated from high school. As the owner or co-owner, you could continue to enjoy the tax advantages of owning the home, and depending on the terms of your divorce settlement, your mortgage payments may count toward your spousal support or child support.

If you don't have children, and your ex can't quite afford to move on just yet, consider keeping the home as-is and splitting the payments (or letting them make full payments) while they continue to sort out their post-divorce financial situation. If you and your ex choose this option, it's important that you discuss (preferably in the presence of an attorney) how profits from any eventual home sale will be split.

It's always important for both parties to consult with their respective divorce attorneys before making any life-changing final decisions. If you and your spouse are insistent on keeping attorneys out of it, and it's your aim to get through this process as quickly and cheaply as possible, it may still be worth your time and money to pay for an hour or two of consultation time with a divorce attorney. He or she may be able to explain what each partner is rightfully entitled to during the dissolution of the marriage and beyond.

If you need general information about preparing your finances for divorce, understanding child support and alimony, or financial planning during and after a divorce, please visit the Protective Learning Center.

Disclaimer: This information is for general informational purposes only and should not be considered legal advice. Always seek the help of a qualified attorney who understands divorce and property laws in your specific state.

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