What happens to a mortgage in a divorce?

It is no secret that a divorce can wreak havoc on a couple’s finances.  Add the financial stress together to the emotional distress of the situation trying to figure out what to do with a house or other real estate gets overwhelming.  No one goes into a marriage with a plan on how to handle dividing a house in a divorce, but thinking ahead can save money, time and energy.

There are options of what to do with a house or real estate that has a mortgage:

  1. Sell the Property

This is often done when neither spouse wants to keep the house.  Couples can split the sale proceeds once closing costs and realtor fees are paid.  Selling the house helps both spouses start over financially so they can buy another house in the future.

  1. One of the Spouses Takes the House and the Mortgage Payment

This involves that spouse refinancing the mortgage in his or her name.  This way the spouse who is not taking the house is removed from the mortgage and the monthly payments.  Whoever signed the mortgage before the divorce stays on the mortgage post-divorce and the only way to take someone off a mortgage is to refinance or to sell the real estate.

Sometimes spouses decide one spouse will get the house and forego refinancing.  This can be tricky.  If both spouses are on the mortgage and after the divorce the spouse who took the house stops making the mortgage payments, both former spouses are going to take a severe hit to their credit.  It may require going back to court to address that spouse not making the mortgage payment especially if there is an impending foreclosure.

Divorcing couples with real estate should give very serious thought to discussing the division of real estate to strategically plan how to handle a mortgage post-divorce.  Planning ahead can prevent foreclosure, years of damage to credit and going back to court.