If you are planning a divorce, then you will likely be dealing with many emotions. However, one thing that often falls by the wayside during a divorce is mortgage payments. Couples need to try and find an amicable solution that will help reduce their financial burdens so that both parties can enjoy a clean slate when all the papers have been signed and the dust has settled.
Here, we will discuss some of the mortgage payment options and solutions at your disposal in the event of a divorce.
Sell the Home
Most experts agree that the best option is for the home to be sold. Moreover, the easiest way to accomplish this is if you have equity in the property. Then, the home can be sold, and the profits can, ideally, be split evenly between both parties.
Still, this option may be difficult for some couples, especially if they have fond memories of living in the home, or children are involved in the divorce.
Allow One Party to Take Over Payments
In some scenarios, one person may want to keep the home. If this is the case, then they can refinance the property solely under their name. However, doing so may prove difficult, as they will need to qualify for the financing using their sole income.
Besides, most experts would advise against this option, as your ex-spouse may not actually make the payments. Remember that the mortgage company deems both you and your ex-spouse as liable for the mortgage costs every month. So, if they fail to make payments, either due to spite, loss of employment, disability, or death, then you will be solely responsible for making all the payments, even if your name is no longer on the deed.
Short Sell the Home
While most experts agree that selling the home outright is the best solution, some couples may not be able to sell the home, as more may be owed on the mortgage than the value of the property.
As such, one option may be too short to sell the property. Essentially, the company that issued the mortgage agrees to accept less than the full worth of the house and opts to cancel the debt during a short sale.
However, please note that, in the United States, the IRS will still deem the debt cancellation that is offered by your mortgage lender as income, so taking the short sale route may have tax ramifications. It will also harm your credit score.
Rent Out Your Home
Another option is to rent out your home for a period. Both parties will have to agree to this temporary arrangement, but if you are able to, it may allow you to delay the sale of your property until you have built up sufficient equity.
If you would like to learn more about mortgage payments and how they will be impacted during a divorce, please visit Northwood Mortgage™ on our website.