Mortgage Options After a Divorce

One question that comes up frequently in family law for people who have decided to get a divorce is what happens to the house when both spouses are on the mortgage? How does the divorce affect the mortgage? A divorce will not supersede your mortgage. If you are asking yourself these questions, you should speak with a divorce lawyer. Mt. Juliet TN Divorce Lawyer Donna Wagner will present you with several options as to how a mortgage can be handled in a divorce. The following are some of the most common mortgage options in a divorce:

Selling the Home

One of the easiest solutions for dealing with a mortgage in the event of a divorce is to sell your home. This option is attractive because the profit from the sale can be split between you and your former spouse.

Decide Whether One Spouse Can Take Over House Payments

If one spouse intends to keep the house, they have the option of refinancing the house in their name only. In order to do this, that spouse would first need to qualify for a refinance based on their income. This can be difficult for some spouses facing a divorce. If for some reason, the spouse who wants to keep the home can’t qualify to refinance the mortgage in their name only, then perhaps it would be best to sell the house. Simply leaving your name on the mortgage and trusting that your ex-spouse will make the payments leaves you at risk of being held responsible for the mortgage costs by the lender in the event your ex-spouse doesn’t make the payments as required.

A Quitclaim Deed

This is a legal way of transferring ownership interest in property to another individual. When one spouse signs a quitclaim deed, they are relinquishing all of their rights to the property. It is important that you not execute a quitclaim deed transferring your rights to the property before your name has been taken off of the mortgage. If you are still on the mortgage when you sign a quitclaim deed, you are still liable for the debt associated with the property despite not having any ownership interest in the property or any right to profits from the sale of the property.

When You Cannot Afford to Sell the House

There are some circumstances when selling the home is not a viable option. For instance, if the loan and the debt associated with the house is greater than the value of the house itself, selling the home would not be a valid solution. In such circumstances, the following options are available:

Short Sell the House

A short sale is a sale where the mortgage lender agrees to buy the house for less than its real value and cancel your debt. A short sale has a negative effect on your credit score and could create a tax obligations since IRS considers the cancelled debt as income.

Rent the House

You and your former spouse can agree to rent the home until you gather enough equity. Renting eliminates the need for a short sale and gives you time to review other options.
If you are wondering how divorce affects your mortgage, talk to Mt Juliet TN Divorce Lawyer for an in depth understanding of the relationship between your divorce and mortgage. Some of the options include selling, leaving payments to one spouse, a quitclaim deed, short selling, and renting.