Unfortunately it happens – the love fades away and with that the marriage comes to an end. But the mortgage you agreed to pay when you were in love remains your responsibility — until you find a way to divorce it and figure out how to deal with real estate during a divorce.
Depending on what area of town you’re in – homes are taking a little longer to sell and with the tight lending requirements, these two factors represent a major obstacle for couples who want to untie the knot these days when a home is involved.
Usually, the mortgage is the biggest liability the couple has to split. And divorcing your mortgage isn’t easy.
In the eyes of the mortgage lender, you remain married and liable for the mortgage unless you sell the house or refinance. For those who can’t do either, there are options that should be explored carefully.
Whether going the traditional route or considering alternative ways to deal with your mortgage in a divorce, couples need to put their emotions aside and focus on the finances, says Chris Remedios, a certified divorce financial analyst at Financial Connections Group in Corte Madera, Calif.
“When people go through a divorce, they feel like they have given up so much, they can’t stand one more thing,” she says. “My job is to help them get past that emotional place and show them how this works for them in the long term.”
Selling a house during divorce
If you can sell the house, that’s the easiest way to put this joint debt behind you. It’s a clean slate for both of you to wipe your hands and walk away. However, you’ll still need to work together to get the home ready for the sale – homes are taking longer to sell and need to be in tip-top shape in order to get them to sell quickly and for top dollar to help you both move on.
For those who owe more on their mortgages than their houses are worth, selling the home might be tricky. They would have to either pay off the difference on the loan or opt for a short sale.
As with any other short sale, the credit score of both borrowers would be affected. And the couple might still be liable for the difference between what the house sells for and what’s owed on the mortgage, unless the bank agrees to release the borrowers from the liability at the time of the short sale.
Should you (or can you) keep the house and refi?
- The couple is not underwater on the mortgage.
- One spouse has sufficient credit and income to qualify for a refinance on their own.
- The other spouse agrees to let go of the house.
But often, the wife or the husband can’t afford to keep the house with one income, don’t qualify to refinance the loan or both.
You need to ask yourself – can you afford to keep this house, and should you keep this house with the memories that will stay with the home? If you’re okay with dealing with the memories, you can think of the home this way – if you were single, would you buy this home?
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