Getting a divorce can be a challenging experience, affecting a person emotionally and financially. It also requires a couple to make various decisions, including property management and distribution. Divorcing couples still paying off their mortgage must decide what to do with their marital home. There are multiple options, but the best choice will depend on a couple’s unique situation. Learn how to navigate a mortgage during a divorce, the options you can choose from, the factors to consider and tips to secure your homeownership rights
Navigating Your Mortgage During a Divorce
Updated: June 1, 2024
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Marriage, Divorce and Your Mortgage
Numerous married couples end up getting divorced. More than a simple separation, divorce involves various decisions like splitting property and dealing with the marital home.
The U.S. has the sixth-highest divorce rate in the world, with approximately 50% of married couples divorcing.
There were 630,505 divorces and annulments recorded in 2020.
About 62% of home buyers in 2021 were married couples. Only 9% of buyers were unmarried couples.
Around 14% of homebuyers financed 100% of the purchase price with a mortgage.
What Happens to Your Mortgage When You’re Getting Divorced
Many married couples finance a home purchase by taking out a mortgage. According to the National Association of Realtors Research Group, 62% of home buyers in 2021 were married couples.
However, not all couples remain married. The U.S. ranks sixth globally for divorce, with approximately 50% of marriages ending in divorce, according to the World Population Review.
For some of these divorcing couples, what happens to their mortgage is one of their biggest concerns.
Who Gets the House in a Divorce?
Typically, both spouses can claim part of the ownership of a marital home. However, if only one spouse wants to keep the house and pay the mortgage, they can refinance or buy the other spouse’s equity.
If one spouse purchased the house before getting married, they might be able to have the property considered a separate asset. Therefore, they can keep the house as the original owner.
What Will Happen to Your Joint Mortgage?
A joint mortgage means both spouses are responsible for the mortgage repayment. They have an equal share of the house and both parties have the right to stay in the home even after separation.
The remaining mortgage repayment will be added to the marital debt during the divorce and divided equally. However, the couple can decide what happens with the home upon separation. For example, you can transfer the joint mortgage to your name if your spouse agrees to remove their name.
Securing Your Homeownership Rights During a Divorce
Both parties can claim ownership of a marital home purchased through a joint mortgage. Your spouse can’t force you to forfeit your claim. They can’t also sell the property without your approval.
You can negotiate with your partner to get sole ownership. If they agree, you can take them out of the mortgage or buy their equity share.
If both parties don’t want to give up their claim or sell the property, the court may have to decide who to award homeownership. You can increase your chances by staying in your home, especially if you have children. You must also demonstrate how you can plan to pay the utility bills and mortgage payments.
Ways to Manage Your Mortgage After a Divorce
Deciding how to divide assets during a divorce can be stressful. However, learning what your options and considerations are can help you make the best decision for your circumstances. Divorcing couples with a joint mortgage can continue the original mortgage. Another way to manage the mortgage is for one spouse to take over the mortgage and homeownership.
Refinance Your Mortgage
You can refinance your mortgage into your name. This will release your spouse’s name from the loan, and you’ll have sole responsibility for the mortgage repayment. However, the lender will only use your income and credit score when determining if you qualify for refinancing.
PREPARE A QUITCLAIM DEED
Remember that a mortgage and property title are not the same. You’ll have to remove your spouse’s name from the title to ensure sole homeownership. Ask your partner to sign a quitclaim deed to prove forfeiture of claim to the property and their right to sell the house.
Take Over the Mortgage
If your spouse isn’t interested in keeping the house, you can assume the loan. Similar to refinancing, you will become the sole borrower. Your lender will remove your spouse’s name from the mortgage. However, you’ll be solely responsible for all future mortgage repayments.
Don’t forget to compare interest rates. If the assumable interest for your mortgage is lower than current market rates, this method may be the better option than refinancing.
BUY OUT YOUR EX’S SHARE OF EQUITY
It’s likely your best option to buy out your spouse’s share of equity to ensure they won’t claim ownership in the future. For instance, if your home’s current equity is $150,000 and you have a 50-50 share, you’ll have to pay your ex $75,000. Then, ask them to sign a quitclaim deed.
Sell Your Home
One of the easiest options for divorcing couples is to sell their marital home and split the proceeds as part of the settlement. This is also the best option if both parties can no longer refinance or afford the mortgage payments.
CONSIDER THE COSTS
Selling your home may come with expenses. Aside from the mortgage balance, you may need to spruce up the place to attract buyers. You may have to pay your realtor’s commission. There may also be taxes involved.
Retain the Original Mortgage
If refinancing isn’t possible and you can’t sell your home, the only option is for you to retain the original mortgage. You can continue to live together until you can sell the house. While this isn’t ideal, it can save you money.
If you don’t want to stay under the same roof, you can opt to rent out your home. Then, you and your ex can simply split the renter’s payments.
CHECK IF SHORT SALE IS RIGHT FOR YOU
Some divorcing couples end up short selling their marital home. This is when the lender agrees to cancel the debt and receive less than the property’s total value. However, this option may affect your credit score. You may also have additional tax responsibilities as debt cancellation may be considered income.
Important Factors to Consider During a Divorce Involving a Mortgage
There are various factors divorcing couples need to consider when dealing with mortgages. Knowing these can help you choose the right method to manage your mortgage as well as your finances after divorce.
Home equity
Find out your home equity. Is it positive or negative? This will help determine if selling your home is the best option. You can hire a professional appraiser to calculate your home’s value.
Tax implications
Buying out your ex’s share of equity comes with tax responsibilities. You may need to pay capital gains taxes if the proceeds exceed a certain amount. The same is true when selling your home.
Credit score
A mortgage is a debt you must repay. Failure to pay on time can harm your credit score. Your credit score can also be affected if you have a joint mortgage and your spouse doesn’t pay their share.
Missed payments
Missed mortgage payments can also happen during a divorce. For instance, if your partner is in charge of paying the mortgage and they miss a payment, you’ll also be affected if your name remains on the mortgage. In worst cases, you may even lose your home.
Children’s needs and well-being
It’s important for divorcing couples to ensure financial stability to support their children’s needs and well-being. Make sure you consider child care and other related expenses when deciding what to do with your mortgage.
Getting a Mortgage After a Divorce
You can get a mortgage to purchase a new home after a divorce. But before doing so, make sure you’re free from your marital home’s mortgage.
Discuss the situation with your loan officer. Inform them about important details related to your divorce, such as:
- Your ex is the one keeping your marital home and is responsible for mortgage repayments.
- You owe or receive alimony or child support.
- You have joint obligations with your ex-spouse, such as credit cards and car loans.
FINALIZE YOUR DIVORCE AGREEMENT FIRST
Owning a home may help you start over, but it’s important not to make hasty decisions. It’s best to finalize your divorce agreement first before making any huge purchases. Your financial situation may change after the settlement.
Expert Insight on Navigating Your Mortgage During a Divorce
Navigating a mortgage during a divorce can be overwhelming. MoneyGeek asked industry experts to share insights to help you understand what to do and avoid.
- What financial advice can you give couples who are going through a divorce?
- What are the most important things divorcing couples should consider when dealing with a mortgage?
- What resources or tools do you recommend to individuals who want to manage their finances better during a divorce?
- What are the most common mistakes divorcing couples should avoid when dealing with a mortgage?
Eric N. KleinPrincipal Attorney of Klein Law Group
Lindsay HellerPartner at Fox Rothschild
Sathya Chey Patterson, CFP®, CDFA®, CSRIC®, AIF®, MBA Managing Partner, Wealth Advisor at Arise Private Wealth
Jonathan D. BreedenAttorney at Law, Owner of Breeden Law Office
Eric SztanyoOwner at Team Sztanyo and We Buy NKY Houses
Travis ChristiansenOwner and Attorney at Boyack Christiansen Legal Solutions
Todd HuettnerDivorce Finance Expert and President of Denver Divorce Professionals
Andrew GriffithAssociate Professor of Accounting, LaPenta School of Business of Iona University
Resources for Divorce With Mortgages
Understanding how to deal with a mortgage can help divorcing couples prevent further misunderstandings and issues. MoneyGeek has compiled some resources and tools you may find helpful.
- American Bar Association (ABA): Learn about divorce, the steps you need to take and how to separate properties and assets.
- Consumer Financial Protection Bureau (CFPB): Learn about mortgage payments and key terms. Find out what to do to avoid foreclosure and scams.
- FindLaw: Get information on property division and distribution after a divorce. Use the search tool to find a lawyer specializing in family law in your area.
- Internal Revenue Service (IRS): Know your tax responsibilities, including those for jointly-owned homes and alimony.
- WomesLaw.org: Find out what to expect during a divorce, the basic steps involved and state-specific laws and requirements.
About Nathan Paulus
Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.
Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.
sources
- Centers for Disease Control and Prevention. "National Marriage and Divorce Rates 2000–2020." Accessed December 6, 2022.
- National Association of Realtors Research Group. "2021 Home Buyers and Sellers Generational Trends Report." Accessed December 6, 2022.
- World Population Review. "Divorce Rate by State 2022." Accessed December 6, 2022.