Going through a divorce can be complicated with everything that has to be negotiated and divided between the couple. When you add a mortgage to the mix, the divorce process and property division process can become more complex when deciding what should happen to the family home.
Getting divorced does not dissolve both spouse's liability to repay their mortgage, even if the divorce decree stipulates that one party will be responsible for paying the mortgage. The mortgage lender can still come after either spouse if a mortgage payment is missed as long as both spouses are still on the loan.
Most divorced individuals will not want to rely on their ex to pay their mortgage on time so it is important for divorcing couples to understand what mortgage options are available when getting divorced in Massachusetts. The three options are selling the home, refinancing or assuming the mortgage. The specifics regarding each option is listed below:
Selling the home is the best option for most homeowners because it removes both names from the mortgage and both parties may be able to profit from the sale of the house. However, the housing market plays a big role in a divorcing couple's ability to sell their home and potentially make a profit.
Since the housing market may make it difficult for homeowners to sell their home, spouses getting divorced may want to consider having one spouse refinance the mortgage. Refinancing allows one spouse to be removed from the mortgage and holds the spouse refinancing solely liable for paying the mortgage. The spouse refinancing the mortgage typically pays their ex their share of equity during this process. However, not everyone qualifies for refinancing their home. Lenders usually review a person's income, debt and credit score, along with other factors, before allowing a homeowner to refinance their mortgage.
A third option is mortgage assumption, which involves a lender allowing one spouse to assume the mortgage and the other spouse will no longer be liable for the mortgage. Many lenders do not allow mortgage assumptions anymore so this may not be an option for many but if it is, spouses should consider it because it usually cheaper than refinancing.
Homeowners getting divorced should consider all of the options available during the divorce process and consult a divorce attorney to fully understand the impact their house will have on the property division process.
Source: Loan Safe, "Mortgage Options While Going Through A Divorce," Evan Bedard, July 14, 2013