Undergoing a divorce is often an overwhelming experience. As you navigate significant life changes, relentless paperwork, and numerous practical inconveniences, you may lack the time—and the motivation—to address your shared mortgage.
Managing your mortgage is crucial to making a clean break and keeping relations amicable. It is crucial to understand fully what happens to a mortgage after a divorce and what you can do to facilitate the process. Hire an expert divorce lawyer, learn your rights, and use this guide to navigate your divorce quickly and efficiently.
How Divorce Affects Your Assets and Debts
Many married couples choose to purchase a home together. When you and your spouse are still happily married and can share your home and its attending responsibilities, your mortgage on that home represents a joint debt. However, once you have decided to get a divorce, you may face the challenge of determining who will assume ownership of the home—and, thus, the mortgage.
As a general rule, couples divide their marital property evenly in the event of a divorce.
You can typically divide assets and finances evenly, but your home is a different matter.
Typically, debt follows assets. Whoever obtains the house will likely assume responsibility for the mortgage.
Though this principle lays the foundation for divorce proceedings, the process is rarely that simple. There are several important considerations when determining who will pay a joint mortgage.
Long-Term Mortgage Payments
Most parties worry about who will ultimately assume responsibility over the home and its related debts during a divorce. Determining long-term homeownership is an essential step in the divorce process.
You may allow your partner to keep the house, securing additional assets for yourself. You may choose to sell your home and divide the profits evenly. If you and your spouse cannot agree, you must resolve your conflict in court.
Short-Term Mortgage Payments
The second important question is who will pay the mortgage until the divorce ends.
This often challenges couples embroiled in dense and overwhelming legal affairs. The person remaining in the home will often incur responsibility for the mortgage.
Spouses sometimes choose to remain in the home together and continue to share the financial burden.
In cases involving spousal support or alimony, the financially advantaged party will likely face responsibility for some or all of the mortgage payment. No matter what you decide, you must pay your mortgage without delay, as neglecting to make a payment can negatively affect both parties’ finances.
Who Assumes a Mortgage After a Divorce?
The spouse responsible for the home is typically responsible for the mortgage. The process is simple if only one person’s name is on the mortgage account. But single homeownership is rare among married couples since the IRS favors married couples who file for a mortgage together.
Minnesota law specifies that divorcing individuals need only divide marital property. But distinguishing marital property from non-marital property is often difficult. Before examining your options, ensure that you work with a qualified family law expert who can help you identify your rights and claim what is rightfully yours. Once you have a lawyer, consider your choices.
Sell the Home
Selling your home is generally the simplest solution to your problem. If both spouses agree to sell the home, you can make the sale, pay off the mortgage, and split the profits evenly between you. Selling the home is often the most efficient means of resolving a homeownership dispute and will address any uncertainties regarding the home’s value.
Refinance the Home
Many couples facing divorce decide to refinance the property under one spouse’s name, releasing the other spouse of all financial responsibility. This process is complex and requires removing your partner’s name from the mortgage agreement and the title.
The refinancing spouse must then qualify for the refinance using their income, debt, and other financial details. Couples with mutual equity in the home can also apply for a cash-out refinance, a system in which the exiting spouse obtains reimbursement for any equity they own.
One Spouse Pays Their Share of the Home Equity
Once you have decided who will keep the house, the other spouse can “sell” their share of the home equity to the remaining spouse. This process generally follows a refinance (though it doesn’t have to). Once the remaining spouse obtains the refinance, they can use a portion of that money to buy out the existing spouse’s share. The outcome of such an agreement rests on several important conditions:
- The remaining spouse must qualify for the refinance or have the money to pay the other spouse.
- The home must have the equity available for the remaining spouse to draw the cash out.
If you and your spouse can immediately agree on who will maintain ownership of the home, you can avoid the financial and emotional burden of uncertainty.
Outcomes to Avoid When Allocating a Mortgage During a Divorce
Although there are several routes you can take to determine homeownership following a divorce, there is one situation you should avoid at all costs: doing nothing. Because the divorce process is so complex, some couples avoid the issue altogether.
This can pose several problems down the road. Leaving your former spouse’s name on the mortgage and keeping the house can negatively impact your ex-partner’s chances of qualifying for a future loan.
Furthermore, having one’s name on a mortgage is an inherent liability. If you aren’t living in the house, you do not want to assume responsibility for a hefty financial agreement. Lastly, if you choose to avoid addressing the issue or making payments on your mortgage, you will face financial repercussions later.
What to Do Next
You can take several measures to make your divorce experience as seamless as possible. First, maintain civil contact with your ex-spouse (if possible). This can help you come to an equitable agreement without legal trouble. If you can, request a professional home appraisal to determine your home’s value and your share of its equity. Above all, work with an expert legal team to ensure that you receive your due share of all marital properties.
Get Professional Advice Today
During a divorce, a mortgage is usually part of the assets that are allocated during the division process. If the house is a marital property, determining who assumes the mortgage can be difficult. If you’re looking for a professional, experienced lawyer, contact CJB Law today to request your free consultation. We can answer any questions and put you at ease.