When it comes to a divorce, you have to make plenty of decisions. If you own a mortgaged home together, you will need to decide your next steps. From selling your share to buying out the other person, you have a few options for your home.
Dealing With Joint Ownership
When a couple purchases a home together, both spouses are considered co-owners on the mortgage unless other arrangements have been made. That means they share the responsibility for the house payments. Even if one spouse decides to move out during the divorce proceedings, they are still legally responsible for the mortgage until the property is sold or refinanced in one person’s name.
If you decide on continued joint ownership after your marriage ends, the lender is not obligated by the divorce agreement. That means if the spouse is responsible for the mortgage and defaults on payments, both parties may have to face the consequences, including negative impacts on their credit scores. Some lenders may work with divorcing couples to find solutions that prevent foreclosure.
Dealing with this shared responsibility can be challenging, especially if one spouse wants to keep the property. In those cases, you need to determine who will manage the mortgage going forward. If you can work out this part of the process, you can avoid any contentious disagreements in the future.
The Challenges of Refinancing a Home
If your spouse keeps the home, you may need to refinance the mortgage in their name. As a result, that individual will retain ownership. Refinancing can untangle the financial ties of the marriage. With that, it creates a new mortgage agreement. Plus, the departing spouse is free from financial responsibility.
However, this process is not always easy. The spouse taking over the mortgage must qualify for the loan based on their own creditworthiness and income. This can often be challenging when the person lacks sufficient income or a strong credit history to meet the lender’s requirements.
Consider a Sale of the Property
For many couples, selling the marital home is the most common solution to the mortgage dilemma. All of the sale proceeds are used to pay off the existing mortgage. This solution gives both spouses a complete break.
However, selling the marital home may be emotionally challenging and perhaps not financially feasible at the time. Keep in mind that this option also eliminates the need for ongoing communication and financial entanglements with your ex-partner. If you had a contentious marriage, selling the home could be the most viable option.
Rent Out the Property
Renting out the marital home is a practical solution during this time. Rather than hastily selling or buying out the property, both parties may want to lease it to tenants. The rental income can be used to cover mortgage expenses. This arrangement is beneficial when the real estate market is unfavorable for a profitable sale.
Once the market improves, you can put the house up for sale. However, you and your ex-spouse need clear communication and an agreement regarding responsibilities, rental income distribution and the duration of this arrangement to avoid potential conflicts.
How Can an Attorney Assist?
Managing a mortgage during a divorce can be highly complex. For that reason, you may want to get advice from a divorce lawyer. A legal professional can provide guidance in drafting agreements that clearly outline each party’s responsibilities and rights.
When it comes to divorces, you can take control of the situation and settle the mortgage issue without involving the court. No-fault or uncontested divorces are excellent options that promote a mutual agreement between the spouses.
Mediation, arbitration and collaborative divorce are other alternative methods that help address the complexities of the mortgage issue through structured yet cooperative environments. With that, you can settle the mortgage issue in a way that is both fair and agreeable to both parties.
Reach Out To a Pennsylvania Divorce Lawyer Today
If you are looking to resolve your mortgage issue during a divorce, book an appointment with the Law Office of Joanne Kleiner in Jenkintown, Pennsylvania. With over 35 years of experience, we have helped numerous clients reach amicable divorce agreements. You can schedule a consultation by submitting our online contact form or by calling us at 215-886-1266.
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