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Divorce, Your House and the Mortgage

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When couples seek a divorce, one of the biggest assets they have is their home. No two mortgage situations are identical, so the “right” approach for one couple may be the wrong approach for another in regards to their mortgage.

If you own a home and you’re headed for divorce, it is critical that your mortgage is carefully evaluated and handled correctly. By making the right decisions about your mortgage, you and your spouse will be in a better position to go your separate ways financially.

Why You Want to Highly Consider Selling

Assuming there is equity in a home, selling is usually a couple’s best option. But, this is only effective if you have equity in your house. In that case, you sell your house and split the profits with your spouse.

Selling can be hard, especially when a couple raised their family in the home and they have a lot of fond memories tied to the property. However, from a financial perspective, selling and splitting the proceeds is the best way to make a clean break.

Can one spouse afford to take the house?

If one of you wants the house, that spouse will have to refinance the mortgage in their name. For this to happen, they have to qualify for the mortgage using their income alone.

If your spouse wants the house, it is not wise to trust them to pay the mortgage as long as you’re still on the loan. Even if you are not on the deed, you’re still on the hook for the monthly payments.

If your ex can’t make the payments because they are injured at work, become disabled, lose their job, or pass away, then you’re liable for the entire debt.

If you want to rent a place of your own, having your name on the mortgage could prevent a landlord from accepting you, since they may be concerned that you don’t have enough income to pay the rent.

As long as you’re tied to another loan, it could prevent you from buying another home since you may not have enough income to qualify for another mortgage.

When Your House is Upside-Down

What if selling is not an option because your home is upside-down? In that case, your options include a short sale, renting the house out, or as a last resort, continuing to live with your ex until the market improves.

If you are getting a divorce and you have a mortgage, be sure to consult with a divorce lawyer before you make any mortgage-related decisions.

To get started, contact Claery & Hammond, LLP to meet with one of our experienced Los Angeles divorce attorneys in a free consultation.

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