Navigating Mort

What happens to a mortgage after a divorce

A house is usually the largest asset that a couple has, and thus, it should be one of the first joint properties on the chopping block.

Divorcing couples have several options for dealing with their marital home. They could:

  • Sell the home and split the profits
  • Maintain the mortgage jointly and use the house as an investment property
  • Relinquish the mortgage to one party

“And if they decide that one party is going to keep it, then theyve got to look at Can they afford it?” Colton says.

Assess your monthly budget and determine if you can realistically afford the mortgage on your own, Colton stresses. A partner who remains in the home will also be responsible for additional housing costs like maintenance and property taxes. The 28/36 rule is a common financial benchmark that advises homeowners to spend less than 28% of their gross monthly income on total housing costs and less than 36% of their gross monthly income toward debt (including a mortgage).

A partner who stays in the home will likely have to requalify for the mortgage, and the lender will require the borrower to prove that they can afford the home alone.

Deciding what to do with the mortgage is usually the easy part. Many soon-to-be divorcees think that splitting a mortgage just requires a trip to the courthouse and a couple of signatures, but its relatively complex. Selling the home is usually the simplest way to wipe your hands clean of the mortgage and your ex, says Colton.

If one partner wishes to stay in the house, you will need to retitle the property before you alter the mortgage. The partner relinquishing the house must sign a quitclaim deed to remove their name from the title. Only then can the mortgage be resolved.

Should you refinance your mortgage after a divorce?

Divorcing couples with joint mortgages may choose to remove one of their names from the mortgage, leaving the other as the sole remaining borrower. There are two ways to do this: refinancing or assuming the original mortgage.

Many post-2008 mortgages do not allow simple mortgage assumptions (removing your co-borrowers name from an existing mortgage). So, refinancing the home in one persons name is the likeliest way to assume a mortgage.

Refinancing is beneficial if interest rates have gone down since you closed on the house, and often, divorce decrees require the home to be refinanced within a certain time frame, Colton explains. However, mortgage rates have been soaring, meaning your monthly payments could go up significantly if you refinance now.

Luckily, you dont have to refinance immediately after a divorce and divorcing couples sometimes reach other agreements that dont require refinancing at all. Keep in mind, in order to refinance, the spouse keeping the home will have to qualify for the new loan based on factors like their own income and credit score.

How to Keep Your Low Interest Rate Mortgage in a Divorce

FAQ

What happens to my mortgage if I get divorced?

What happens to a mortgage after divorce? If both parties signed the mortgage documents, then both remain on the hook for the debt, even after a divorce. That’s why former couples often decide to sell the marital home and pay off the mortgage. If you opt to keep the house, you also keep the mortgage.

Who loses more financially in a divorce?

After separation, men’s incomes on average drop 17% while they decline 9% for women, researchers said in a blog post Monday. Employed people who went through a divorce in the past 12 months saw a 12% cut in income, earning less than peers who didn’t go through a divorce.

Is divorce considered a financial hardship?

Most commonly, spouses have to go from supporting one household to two and this is usually all you have to explain. Sometimes, there are additional costs for one of the parties resulting from the divorce (like child support or family law attorney’s fees) that can be mentioned as part of the financial hardship.

What will I lose if I get divorced?

Marital property is generally defined as all income, property, and debts acquired during the marriage. That property is seen as owned equally by both spouses, and therefore will be distributed equally after the divorce, with a couple caveats.

Can a divorce remove a spouse from a home loan?

Refinance. Refinancing a mortgage is one way to remove a spouse from a home loan. If you own the home jointly but only one of you plans to retain ownership after the divorce, then refinancing can put the loan into your name only going forward. You’d need to be able to qualify for a new mortgage loan in your name for that to be a viable option.

What happens to a mortgage after a divorce?

Once the deed is filed, the divorced couple need to resolve the mortgage. Refinancing the loan and taking a new one in the name of the spouse keeping the property. Dealing with the mortgage is very important. It is possible for a deed to be quitclaimed but for both divorcees to remain on the mortgage.

Who pays a mortgage after a divorce?

When a divorce occurs, regardless of what the divorce decree says, both spouses remain legally responsible for paying the creditor if both names are on the loan. That means even if you — and the court — agree that your ex should take over mortgage payments, the creditor could come after you to collect.

Can a divorce mortgage help you get a home loan?

Divorce and mortgage considerations often add complexity to an already challenging process. With a joint home loan in the mix, navigating a divorce requires careful planning. Yet, proven divorce mortgage strategies can assist both parties.

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