How a Mortgage May Be Addressed When You Separate

In Separation & Divorce by Elizabeth Stephenson

Besides your retirement accounts, your marital home is likely the most valuable piece of property you own. You’ve likely invested a massive share of your savings and income to build equity in this important investment. When couples separate and divorce, this home becomes one of the big issues in settling the division of marital property. One of the important details, however, when figuring out how the home will be divided is what happens to the mortgage?

That’s right. While a house is a giant asset, your home mortgage is one of your biggest monthly expenses. Therefore, it is important to understand the options available to address the mortgage in an equitable distribution proceeding.

One Spouse Gets the Home

A common scenario is for parties to agree, or for a court to order, that one party gets to keep the home while the other party is awarded marital property to compensate them for his or her share of the equity in the home. What happens to the mortgage in this situation? Ideally, the spouse who keeps the home can refinance the mortgage. This is necessary because many mortgages feature both spouses as co-borrowers, and the spouse who is giving up their interest in the home should not be liable if the other borrower defaults. Therefore the refinanced mortgage loan should be solely under the name of the spouse who the house belongs to.

Unfortunately, this can be easier said than done, as obtaining approval for a refinance requires a credit check and proof of income. This can be tricky or can even be financially inadvisable if the interest rate is exorbitant. Therefore, alternative plans may need to be explored regarding the mortgage.

Selling the House

In other scenarios, a couple may not want to keep the home or cannot afford to. In these situations, it is necessary to sell the home. This may be a lengthy process depending on the real estate market of your home. While the home is listed, a supporting spouse may be ordered to make the mortgage payments on the home. Once the sale occurs, the proceeds of the sale of the home will be used to satisfy the mortgage before the remaining equity is distributed to the parties.

Let New Direction Family Law Assist You

The division of property is both vital to your future and highly complex. If you are separated with the intention of divorcing, you need to speak with an attorney for help. At New Direction Family Law, we have years of experience and are highly knowledgeable about the laws behind equitable distribution. We can use this knowledge to fight for your legal rights and to ensure that property is divided in a fair manner. Contact us if you need help. Our office proudly works for clients throughout Wake, Johnston, Durham and surrounding counties. Call New Direction Family Law at (919) 719-3470 to schedule an appointment or visit us online at our website.