Divorces often come with significant legal, financial, and emotional challenges. For many homeowners going through this difficult time, one of the biggest concerns is what will happen to their shared house. Whether you want to keep your home, sell it, or qualify for a new mortgage, knowing what your options are will help you make an informed choice.
Determine Who Will Keep the Home
If you and your spouse share a mortgage, you’ll need to decide what happens to the home together. First, consider whether it makes sense for one of you to keep the property. The spouse who wants to stay in the home can refinance to remove the other’s name from the mortgage. This also frees the departing spouse of any financial obligations tied to the house. If you need to buy out your ex’s share of the home, a cash-out refinance allows you to tap into your home’s equity to do so.
Another option is to have one spouse take full financial responsibility for the loan without refinancing. However, this only works if the loan is assumable, and it requires lender approval. If neither spouse can afford to keep the home, selling and splitting the proceeds may be the simplest option.
Managing Joint Property Responsibilities
Of course, things aren’t always quite so cut and dry. In some cases, especially when children are involved, ex-spouses may choose to maintain joint ownership. If this situation applies to you, establish clear agreements on financial responsibilities by deciding who will pay the mortgage and cover home expenses. Remember that while both names remain on the loan, late payments will impact each of your credit scores. If you’re delaying a sale or buyout, make sure the terms are explicit and well documented. Ensure all agreements align with your divorce decree, and communicate with your lender.
The Impact of Alimony and Child Support
Keep in mind that lenders consider alimony and child support when evaluating mortgage applications. Whether you’re receiving payments or making them, this may impact your loan terms if you refinance or purchase a new property. Pay attention to your debt-to-income ratio, as this will impact your borrowing power. Make sure to keep a record of any payments you make or receive to provide documentation as needed.
Qualifying for a New Mortgage Post-Divorce
If your credit was tied to joint accounts, review your score and take the necessary steps to improve it before applying for a new mortgage. Lenders will evaluate your solo income, existing debts, and financial stability, so pay attention to your income-to-debt ratio. Depending on your situation, you may receive a settlement or payments from selling your home. Think about putting this money toward the down payment for your next property.
As overwhelming as a divorce can feel in the moment, researching options when it comes to your joint property is the best way to secure your financial future. If you’re unsure of the best path forward, consult with a mortgage professional or financial advisor to help you make the best decision.
Sources: Youtreecoaching.com, Consumerfinance.gov
We are ready to help you find the best possible mortgage solution for your situation. Contact Sheila Siegel at Synergy Financial Group today.
