How Should I Handle a Mortgage When Divorcing?

I just published this article on my website:

Mortgage concept by money house from the coinsIn addition to dividing assets when getting divorced, couples must also address debts. This means they must choose how to handle mortgages as well as homes.

Divorcing spouses in Colorado who own a home together must generally wrangle with the question of what they will do with their home once divorced. Many people, especially women, have strong emotional ties to their homes. This can make the thought of selling a home very difficult and upsetting.

If young children are involved, concerns about maintaining stability for the kids often contribute to a decision to keep a home. For other people, they prefer to sell a home so as to get more physical and emotional distance from their prior marriages and lives.

Houses and mortgages are not the same

Regardless of what people decide to do with their home, it is important for spouses to remember that making a choice about a home is not the same as making a choice about a mortgage. Conscious and deliberate thought must be given to what should happen to the financial liability associated with a home .

Selling a home

Bankrate explains that among the many options divorcing spouses have, selling a home may be one of the cleanest and least pitfall-ridden from a purely financial perspective. This eliminates any future financial ties regarding the mortgage between spouses once the divorce is over.

If the home’s equity is less than the amount owed on it, a short sale may be required. While this may have some negative credit impact, it again makes a clean break for both spouses.

Sharing the mortgage

If the couple keeps the home even if only one spouse will continue to live in it, they could choose to maintain a joint mortgage. Spouses should be very careful about this arrangement even if a divorce decree specifically states that one spouse is responsible for making the mortgage payments.

If both names are on the mortgage, both people can be held accountable for the debt. Any missed payments or foreclosure can negatively affect both spouses’ credit. According to Time, this is true even if a quitclaim deed transfers ownership of the home to one person only. Again, homes and mortgages are not one in the same.

Refinancing

One person may wish to keep the house and is able to get a new mortgage in his or her name only. This avoids the issues associated with maintaining a joint mortgage and lets the spouse who wants the home have it.

Getting the right guidance

In addition to remembering that homes and mortgages should both be reviewed, decisions about either should not be made in vacuums. Working with an attorney when getting divorced is always recommended so Coloradans can understand their full financial picture with all assets and liabilities viewed together.

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