What Happens to A Mortgage After A Divorce?

Posted in Divorce on May 6, 2018

Legally, a mortgage does not prevent the granting of a divorce. It is just a debt, and debts (while an issue needing resolution) cannot legally stop a couple from getting divorced. Of course, there’s much more to it than just the bare legalities of having a mortgage. Let’s discuss the practicalities, problems and possible solutions.

If there is a mortgage, it’s almost always because there is real estate involved and that is almost always the family home. Typically, both spouses are on the deed (which shows who owns the property and says nothing about the mortgage) and on the mortgage (which states who must pay the loan and has nothing to do with who actually owns the property).

If the couple decides to divorce, the simplest disposition of the realty and mortgage is to sell the property and divide up the proceeds in an agreeable fashion. (If the property is “under water” and sells for less than the mortgage payoff, the couple is faced with the task of deciding how to pay off the deficit after the sale.)

Frequently, it is decided that one party will move out and the other will stay, keep the house and pay the mortgage. The simplest way to do this is for the remaining spouse to refinance the mortgage into his/her sole name. It may be agreed that the departing spouse be paid an agreed share of the equity and that can be done in numerous ways, for example by a lump sum payment out of the refinancing or out of savings etc, or monthly payments from the remaining spouse to the departing one, or by a lump sum, either by specified amount or a percentage, when the remaining spouse ultimately sells the house. The sale of the house can be agreed to at a future date certain or an event, such as the remaining spouse’s remarriage or the last child moving out.

That being said, it is not at uncommon for a spouse to move out trusting the remaining spouse to remain in the house and make the payments. When that happens, the departing spouse may or may not, by agreement, be paid a fair sum, in a lump or payments. Often there is no equity in the realty and it is agreed that the departing spouse will receive nothing and will sign off of the deed (which can be done even if there is a mortgage). These arrangements are often influenced by which party wants the divorce most. That party typically must make concessions to the other to be able to get a simple, uncontested, no-fault divorce.

I will be happy to discuss your particular circumstances with you at no charge, M-F, noon to 3 PM, 1-800-486-4070.