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What Happens to a Mortgage in a Divorce?

Posted By Cairns Law Offices || 12-Feb-2018

If you’re like so many married couples, you got married, bought a house and had two or three children. You may even have two newer vehicles parked in your garage – you’re probably living like the rest of the middle class. And like 50 percent of married couples in the United States, your marriage is ending in divorce. You’ve joined the divorce club.

Aside from a 401(k) or IRA, your house is probably your greatest asset, or at least the biggest investment of your life. Now that you’re divorcing, what’s going to happen to your mortgage? This is a very good question indeed.

We’re not going to candy-coat it – divorce can cost couples a fortune, which is why our firm is dedicated to offering cheap, no-fault divorces for only $219. If a divorce is messy or contentious, it can damage a spouse’s credit, deplete their savings, and lead to financial ruin. One of the biggest assets (and debts) a couple shares is their home’s mortgage.

During your divorce, you want to handle your mortgage correctly. Since it’s likely the biggest asset or debt that you have, you need to make a logical decision; one that will allow you to go your separate ways with the right financial footing.

1. Selling is Usually the Best Choice
In most divorce situations, selling the house is by far the best option for all parties involved. However, this works out when there’s some equity in the house. You simply put the house on the market and when it sells, you split the profits 50/50 with your spouse. Emotionally, selling may be easier said than done. Maybe you raised your children in the home. Maybe you poured thousands into remodeling and ate out for months during kitchen renovations. But from a logical standpoint, the easiest way to deal with the mortgage is to sell the house and split the proceeds.

2. One of You Wants to Take Over the Payments
You or your spouse really want to keep the house. If this is the case, that spouse needs to be able to refinance the home in their name alone, without the other spouse. The question is, can this spouse qualify to refinance with their income alone? Is their FICO score good enough? Do they have too much debt?

Suppose your spouse wants to pay the mortgage payments but keep you on the loan. Sounds simple, but it’s a bad idea. Even if your name is removed from the deed, the mortgage company doesn’t care. As far as the lender is concerned, you and your ex are legally responsible for the loan. If your ex misses a single payment; for example, if he or she loses their job, or they fall ill, or get injured at work, you’re on the hook for the mortgage.

Even if your ex is a reliable, trustworthy person who would never force you to pay the mortgage after the divorce, having your name on the loan could bar you from getting another mortgage until it’s paid off or your ex sells the property, unless you earn six figures and can qualify for two mortgages without a problem. The mortgage can even prevent you from renting a house or an apartment. Potential landlords can fear that you won’t have enough money to pay the rent because your first duty is to the mortgage.

3. When Selling Isn’t an Option
If you don’t have any equity in the house to sell it, this is where things can get hairy. If selling is impractical because you owe more than the house is worth, your options include: 1) renting the house out, 2) continue living together, or 3) letting the house go (foreclosure). Of course, all three of these options have their drawbacks. If you can manage to rent the house out, you’ll have to continue communicating with your spouse, but this may be the best solution given your options.

To learn more about dealing with a mortgage in a Pennsylvania divorce, contact Cairns Law Offices for a free case evaluation.