What Happens With Your Mortgage After a Divorce?

You’ve begun the divorce process, and now you must determine what to do with the “family house.” Understanding what happens with your mortgage after a divorce can feel overwhelming when you don’t know your options. Read on to learn about your post-divorce-agreement mortgage loan options in Massachusetts.

Your Mortgage Options After a Divorce

Whether you’ve finalized your divorce decree or just begun the process, it’s important to begin considering how you and your ex-partner will handle the mortgage payments. Your primary options will involve either selling the house or refinancing it.

Sell and Split the Profits

Many ex-couples choose to sell the house after a divorce out of convenience. Financially and legally speaking, this option is the simplest. You and your ex-partner would sell the property and split the profits based on your equity (the share of the house you’re entitled to).

While this option may seem obvious to some, it comes with additional complexities that can make it challenging for others. If you have emotional ties to the property or need adequate space to raise children in their school district, moving from your home may not be an option.

Refinance the Mortgage

The next popular choice for divorcing couples that don’t want to part with their property is refinancing the mortgage. In this mortgage after a divorce scenario, one partner refinances the loan under their name. If you choose this route, you must ensure that the partner keeping the home removes the other partner from both the title and the mortgage to prevent future payment collection complications, loan approval issues, credit score impacts, and more.

The spouse who wishes to keep the house will have to qualify for the loan as an individual, which can be challenging. The lender will evaluate their credit score, debt-to-income ratio, and more.

Delay Selling for a Set Period of Time

Sometimes, divorcing couples want to sell the property, though not quite yet. You may want to delay the sale for family purposes, like waiting on children to reach a certain age, or for financial purposes, like allowing the property to gain more value.

You can delay the sale by creating a co-ownership agreement where one, both, or neither of you live in the property during the set time, depending on your preferences. For example, you may choose to rent out the house for a few years before selling. Co-ownership agreements involve fulfilling mortgage payments on both ends, which can be complicated in a divorce, so be sure to speak with an attorney first.

Important Considerations

Before deciding which route to take, consider the following questions:

  • What is your property worth?
  • How much do you still owe on the mortgage and how much have you paid?
  • What is your equity in the property?
  • What are your state’s policies on asset division?
  • Is your name on the title and mortgage?

Seek Legal Support in Massachusetts To Learn About Your Options

Navigating your mortgage after a divorce can feel overwhelming. Call Jordan & White, LLC, in Danvers, MA, at (978) 744-2811 to discuss your options with our estate planning attorney team.