It’s an unfortunate truth that around a third of recent marriages will end in divorce. But while your emotional commitment might be over, your financial ones still stand. Your mortgage is often the biggest liability you’ll need to manage if you divorce, and the process of separating the assets and responsibilities can be complex and lengthy. Here are some of your least painful options during this difficult time.
The most favorable option with the least loss incurred, this involves one of the partnership refinancing the house under his or her own name. The person whose name the house will be re-mortgaged under needs to have good credit, and mortgage payments have to be up to date for the last twelve months for this to be feasible. It means that one of the partners is immediately and permanently exempt from the mortgage arrangement and forfeits all rights to the property, cutting all ties and keeping things simple and clear.
For seniors going through divorce, there is another option if the separation is amicable and if you have enough equity in the house. It is possible to reverse mortgage the property for a stable income.
2. Continue To Live Together
Often an unfortunate consequence of not being able to afford legal fees, come to an agreement that’s mutually beneficial, or due to extenuating circumstances, a surprising number of couples take this route. It’s obviously a challenging situation and requires a fairly amicable divorce, as well as a sizable house, to make it work, and it’s rarely a long term solution.
Once you understand how your mortgage is affected by your divorce, you may wish to rent your property out until a long term solution can be found. This is a good option if the rental market in your area is good, but does require a cordial or at least working relationship between divorcees to deal with the business side of the transaction. Don’t forget that preparing a property for the rental market takes time, money, work, or all three, so be prepared to invest at least one of these, in coordination with your spouse’s efforts.
Always a good option if you can bear to wait for a good price, selling your home should allow you to settle the mortgage and move on, no strings attached. If you owe more than your mortgage is worth, however, you’ll have to pay off the difference on the loan or go for a short sale, which will affect both of your credit ratings and will mean you’ll get less for the house than it’s worth. It’s a good option if you want proceedings to go quickly and are prepared to front the loss.
5. Sign A Quitclaim Deed
This is where one of the spouses signs a legal document that transfers all of the rights to the property to their husband or wife. It doesn’t change any of the other terms of the mortgage, and all the payments should still be made in full and on schedule. A quitclaim deed only affects how the property is titled and doesn’t change the loan obligation, so the house is not under a joint name any more. Don’t forget that if you sign one of these, you’re forfeiting the right to profit from the sale of the home – your ex-spouse could sell or refinance at any time and not owe you anything.
6. Get Advice
Especially if there’s conflict involved in the divorce settlement, it’s really important to get professional advice on how best to handle your interests from a specialist divorce attorney. Your mortgage is often such a big financial commitment that it can present major difficulties if it’s left unresolved. Try and settle any outstanding agreements with the mortgage before you finalize the divorce.
7. Determine Where The Rights Lie
Who has a stronger claim to preserve ownership of the house and the mortgage depends on a number of factors. If your annual income is significantly larger than your spouse’s and you have no children together, you are more likely to ‘win’ the house and mortgage. You can buy out their share and re-mortgage in your own name. However, if they have been awarded full custody or the majority custody or your children, he or she is more likely to have a stronger claim to the property.
The most important thing when dealing with a mortgage during divorce is to explore all the options relevant to your situation thoroughly before coming to a conclusion. Although it’s difficult, attempt to keep emotion from clouding your judgement and pushing you towards hasty decisions. Communicate clearly with your soon-to-be-ex and take the advice that the professionals offer you.