Navigating a divorce involves many complexities, and one aspect that couples must address is what to do with their mortgage. The decision regarding the mortgage can have long-lasting financial implications for both parties.
Fortunately, there are several options available to handle the mortgage during a divorce, providing couples with flexibility based on their circumstances.
Sell the home and split the proceeds
A potential option for handling the mortgage in a divorce is to sell the marital home and divide the proceeds. Selling the home allows both parties to move forward independently. It also alleviates any financial ties associated with the property. Selling the home may also provide a clean break and closure, allowing each spouse to start anew.
One spouse keeps the home and refinances
Another option is for one spouse to keep the home while the other relinquishes his or her interest. In this scenario, the spouse retaining ownership of the home may buy out the other spouse’s share of equity. This involves refinancing the mortgage in his or her name alone to remove the other spouse’s financial obligation. By refinancing, the remaining spouse assumes sole responsibility for the mortgage and any associated costs.
Co-own the home for now
For some divorcing couples, co-owning the home temporarily may be a viable option. This may work if they have children who benefit from maintaining stability. In such cases, the divorcing couple may continue to share ownership of the home until a specified date, such as when the children reach a certain age or graduate from school. However, former couples must establish clear guidelines and agreements regarding mortgage payments, upkeep and eventual property sale.
Handling a mortgage during a divorce requires careful consideration and negotiation between the parties. By exploring these options, divorcing couples can make informed decisions that align with their financial goals and priorities.
