Evaluating Your Divorce Real Estate Options
In most marriages, the mortgage is the largest liability the spouses have to split, and divorcing the loan payment is not so easy.
Love may not be forever and marriages end, but the mortgage for the marital home remains. Those mortgage payments are still your responsibility unless you find a way to part with it. From the lender’s perspective, you are still married and obligated to continue paying the mortgage unless you sell the house or refinance it.
The easiest way to rid the joint debt is to sell the property, pay off the mortgage, and move on to build better memories. Barring that, “refinancing the home loan under the name of one spouse can be an easy fix”, says Marty Halfon. “The biggest question you need to pose is whether one spouse on their own can afford to keep the house and keep in mind, there are many other expenses attendant to home ownership, not just the mortgage payment”, he reminds divorcing spouses.
A mortgage refinance may be appropriate if certain conditions are met.
- The divorcing spouses are not "underwater" on the mortgage, meaning they don't owe more than what the house is worth.
- One spouse has ample credit and income to meet the credit qualifications.
- The other spouse is ok to let go of the family home.
Marty has seen some circumstances, however, where the husband or wife do not have enough income on their own to keep the marital home, they can’t survive the mortgage underwriting process, or both. “I ask my clients a very pointed question”, Marty says. “That is, if you were single, assuming you were never married and lived in the home at all, would you purchase this home?”.
If both spouses can’t shoulder the mortgage on their own, can’t refinance and can’t sell the marital property, you can theoretically arrive at some agreement and leave the mortgage “as is”, and try your best to make sure your ex coughs up their share of the mortgage payment each month, but Marty strongly advises against it. “This type of informal arrangement is risky, since let’s say the ex-spouse doesn’t keep up with their mortgage”, Marty warns. “In that case, both the husband and wife’s credit is tarnished”.
Is it possible to get a mortgage after the divorce?
It’s vital that the settlement and decree spells out in no uncertain terms that the spouse that continues to inhabit the family home is solely responsible for the mortgage payment. After all, if one spouse wants to apply for a loan in the future, the lender must be convinced you are absolved of this obligation. Some lenders even go so far as asking for cancelled checks from your ex-spouse to prove that you are not the one making the payments.
Whatever options are best for your circumstances, this process is best approached with a neutral, experienced REALTOR like Marty Halfon. By having Marty in your corner early on, you can avoid many hassles and problems later.