Divorce and my mortgage. What do I need to know?
If you’re currently going through or have recently finalized a divorce, you may be thinking about what happens to your mortgage and your home. It’s likely a shared debt, and probably the largest one you have. Let’s look at that more below.
If both parties signed the mortgage documents, then both will remain liable for the debt, even if they divorce. As a result, divorcing couples often decide to sell their home so they can pay off the mortgage and start over without that debt and without the tie to each other. Some couples with a joint mortgage decide to refinance in only one spouse’s name. This allows the removed person to move on from the house with no liability. To do this, you must verify that one person can afford the mortgage alone, and they may have to requalify for the mortgage.
Keep in mind that the removed partner also needs removed from the title. In cases where only one spouse was on the mortgage, but both were on the title, a quitclaim deed must be filed to remove the other name. If this isn’t done, they can still benefit from the sale and equity in the home down the road, even after the divorce is finalized.
Alternatively, the partner keeping the house could use a cash-out refinance to pay the one moving out for their share of the home, provided there’s sufficient equity built up in the property.
When applying for a mortgage after divorce, there are specific documents needed. A copy of the divorce decree, separation agreement, court order, or equivalent documents should be obtained for your loan file. If you’re required to pay alimony or child support for more than the next 10 months, this will be considered with your monthly debt obligations. If you receive alimony or child support and these payments are court ordered to continue for at least the next 3 years, they can be added as income in your file.
For more specific details on different loan programs and document requirements, our trusted Mortgage Specialists are always available to help.