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Mortgages & Divorce Guide

As much as you would just like to get everything over with, considering carefully how to deal with an existing joint mortgage while going through a divorce may protect you from future financial problems. There are different options to choose from when deciding on your course of action. No matter what you decide, you should always have it clearly defined and written on paper before the divorce is finalized.

Your Options

  • Stick with it
  • You may decide that you want to keep things how they are for reasons only you know. Perhaps you want to keep the house intact for the kids. Although, this route is not the wisest. No longer being tied in matrimonial union, your ex spouse may get into financial trouble and you aren’t aware of it. This could result in the loss of your home since you both have ties to it.

  • Somebody keeps it
  • If one of the two of you wants the home, then an arrangement can be made for the other to allow the one who wants the home to assume the mortgage loan. One thing to do before deciding on this is to check with your lender to see if your mortgage is assumable. The retaining spouse must meet all income requirements on their own. A copy of your divorce decree may also need to be provided.

  • Refinance
  • If there is substantial equity in the home, one might decide to buy out the other to keep the home. The spouse that will be keeping the home must then refinance to release liability of the mortgage and assume full responsibility. The other spouse needs to sign a quit claim deed to relinquish any ownership of the property. In an attempt to fully protect yourself should your ex default on the mortgage before the mortgage is refinanced, you should have them sign a Deed of Trust to Secure Assumption. Also notify your lender of the divorce and ask them to notify you at your new address if any payments are missed. This way if your ex does default, you can take back ownership of the house.

  • Sell the house
  • Maybe your best option is to start with a clean slate and sell the house entirely. This is the easiest way to protect yourself from liability of the mortgage and agree on terms financially. This will also save any fights over taxes due, mortgage payments, and upkeep of the home. The profits from the sale can be used to pay off the mortgage. If there is anything left, decisions must be made on who gets what percentage of that. It should be sold before the divorce so as not to pose any problems over the sale price.

    Whatever is decided, legal documents should be written to prove it. Both participating parties should be protected from any future unwarranted damage. Responsibilities should be clearly defined before the divorce is finalized. After the divorce is finalized you no longer have legal aid by your side. Always remember that possibly the best thing for the both of you is to have as little legal connections as possible with each other. You’ve already determined that you don’t want to share your lives together, preferably nothing should be left to keep in each others hair.


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