What Happens to Our Mortgage When We Get Divorced?

Back in the height of the booming housing market, dealing with a marital home and any accompanying mortgage in the context of a divorce was relatively easy. When the market crashed, however, selling the marital residence and splitting the proceeds between the spouses became a far more difficult proposition. These days, how to deal with mortgage debt and avoid a potential mortgage foreclosure is a more common approach to the marital home. Fortunately, as a Bankrate.com article explains, there are a variety of different options for handling this situation.

The Reality of a Joint Mortgage Loan

When a married couple purchases a home, they are likely to take out a joint mortgage loan together. As far as the mortgage lender is concerned, you are both legally responsible for that loan, whether you remain married, separate, or divorce. In order to eliminate this legal responsibility, you must either sell the residence and pay off the mortgage loan, or one of you must refinance the mortgage loan in order to remove the other spouse’s name from the loan.

Selling the Marital Residence

In today’s housing market, selling a home may be easier said than done, particularly if the home is mortgaged for more than it is worth or the value for which it can be sold. The couple may have to sell the home for less than the value of the mortgage loan, in which case they could be held responsible for the balance of the loan. Another potential option is a short sale, which allows a sale of the home at a reduced cost, but the bank has to agree to allow this type of sale to take place. One disadvantage to the short sale route, however, is that it will adversely affect both borrowers’ credit scores. There also is the problem of keeping the mortgage payments current until a sale can occur, which may be impossible if the spouses already have separated and are now maintaining separate residences.

Refinancing the Marital Residence

Another means of resolving the joint mortgage issue is for one spouse to keep the home and refinance the loan to remove the other spouse’s name from the loan. This can only work, however, if you are not underwater on your mortgage loan, the refinancing spouse has good enough credit and income to refinance the mortgage, and both spouses are in agreement on this plan. Additionally, all too often, neither spouse can individually maintain the mortgage payments, nor qualify for refinancing. If one spouse opts to keep the residence and make the mortgage payments, however, things get risky for the other spouse. If your spouse fails to makes the mortgage payments, the bank also will pursue you for the payments, a delinquency will show on your credit report, and ultimately, you may end up in a mortgage foreclosure suit.

If you and your spouse own a residence that has a mortgage loan on it, an experienced Fort Lauderdale family law attorney can help by investigating your case, presenting all of your options, and guiding you in making the decision that is best for you and your family. When you are going through the many emotions that often are part of divorce, handling property and debt matters can be confusing and overwhelming. Fortunately, we can help. Contact Vanessa L. Prieto Law Offices, LLC in Fort Lauderdale today, and let us show you how we can effectively and efficiently guide you through your divorce case.