When it comes to divorce, one of the biggest financial concerns is what happens to the family home and the mortgage that goes with it. Here are four essential things to know about divorce and mortgages:
Joint Liability Does Not End with a Divorce
Just because you get divorced doesn’t mean your joint liability for the mortgage ends. If both spouses are listed on the mortgage, both are still responsible for making the payments, regardless of who stays home. If one spouse stops making payments, the other spouse’s credit will be negatively affected, and the lender can still pursue them for payment.
It’s important to note that while a divorce agreement can stipulate who is responsible for making mortgage payments, it does not remove liability for the lender. The only way to remove a person’s liability from a mortgage is to refinance it solely in the name of the spouse who will keep the home.
Refinancing May Not Be an Option
While refinancing the mortgage in one spouse’s name may seem simple, other options may exist. Refinancing requires the person who wants to keep the home to qualify for the loan on their own, and this may only be possible if they have a steady income or good credit history. If refinancing isn’t an option, the couple may need to consider selling the home and splitting the proceeds.
The Family Home May Not Be the Best Asset to Keep
While keeping the family home may seem obvious, there may be better financial decisions. The house may have a high mortgage payment, maintenance costs, and property taxes, which can be difficult for one person to handle independently. It’s essential to consider the long-term financial implications of keeping the home and whether it’s worth it.
Timing Is Important
Timing is crucial when it comes to divorce and mortgages. It’s essential to start thinking about the future of the family home as soon as possible. If one spouse wants to keep the house, they should begin the refinancing process before the divorce is finalized. If the couple decides to sell the home, doing it as quickly as possible is essential to avoid further financial strain.
Seek Legal Advice
Navigating the complexities of divorce and mortgages can be overwhelming, especially if the couple has children or joint assets. Seeking legal advice from a qualified attorney can help clarify the legal and financial implications of the divorce and ensure that both parties are treated fairly. The attorney can also help negotiate the divorce agreement’s terms and ensure that both parties understand their responsibilities and rights.
Consider Alternative Options
Divorce and mortgages don’t always have to end in a sale or refinance. Couples can consider alternative options such as renting the home, setting up a buyout agreement, or even co-owning the property. These options can benefit couples who want to maintain joint ownership of the property or those who wish to continue to generate income from the property.
Keep Communication Open
Divorce can be emotionally charged, but it’s essential to keep communication open regarding the family home and the mortgage. Both parties should be transparent about their financial situation and willing to work together to find a solution that benefits them. Open communication can also prevent future conflicts and ensure that both parties are on the same page.
Protect Your Credit
Divorce can significantly impact both parties’ credit scores, especially if one party fails to make mortgage payments. Both parties should ensure that mortgage payments are made on time and in full to protect their credit. It’s also important to monitor credit reports regularly to ensure no errors or inaccuracies can negatively impact credit scores.
Divorce and mortgages can be challenging, but with the right approach, couples can navigate this difficult time and make the best decisions for their financial future. When dealing with divorce and mortgages, seeking legal advice, considering alternative options, keeping communication open, and protecting credit scores are all important factors to consider. By taking a proactive and informed approach, couples can minimize the financial impact of divorce and move forward with confidence.