Breaking Up With Your Mortgage

Showing a broken heart

Breaking Up With your Home: Handling Homeownership During A Divorce

 Sometimes love is fleeting and marriages end, but that mortgage you agreed to pay together back when you were still in love is still your responsibility…until you find a way to divorce that, too.

Usually, the mortgage is the biggest liability a divorcing couple has to split, but divorcing your mortgage isn’t always easy.

As far as your mortgage lender is concerned, if the mortgage was taken out in both of your names, then you are still required – and expected – to pay that every month.

Here are a few options that you should consider when deciding how to handle the house & mortgage if you find yourself going through a divorce:

Selling the House

If neither party is interested in keeping the house, then selling it and splitting any profit after the mortgage is paid off from the proceeds is a decent and fairly straight forward option. Keep in mind other factors like the current housing market and how much is still owed on the mortgage versus what you are able to sell the home for. It needs to make sense to be able to sell the home for at least what is owed on it.

Keeping the House and Refinancing

Maybe one of the spouses has a strong preference to stay in the house versus selling it. In this case, they will need to make sure that the other spouse is off the hook from any financial responsibility to the house free and clear. The way to do this is for the spouse wishing to keep the house to refinance the current loan themselves.

In order for this to work, the mortgage should not be “under water”, the other spouse is not contesting that they agree to let the house go, and the spouse wishing to keep the house has sufficient credit and income to qualify for a loan and subsequently continue to make mortgage payments alone every month.

Keeping the Mortgage As Is

This is obviously a risky option, especially depending on how amicable the divorce actually is. But if neither spouse is able to refinance the loan on their own, they’re unable to sell the home, or to pay off the existing mortgage, you could leave the mortgage as is.

In this risky scenario, the spouse not living there would basically be “hoping” that their ex is making the payments each month. If not, both of their credit will get tainted as a result.

And here’s a pro tip: just getting yourself off of the Deed does not mean that you’re off the mortgage as well. This is a very important distinction that you should be aware of and understand up front.

And make sure also that the divorce decree specifically spells out who will be responsible for the mortgage and what happens if the spouse in the house misses a mortgage payment. Suggestions include that the divorce decree specifically state that the house must be sold or refinanced within a specific time period.