You’ve made the decision to separate, but you don’t want to separate yourself from living in a house. Or you are trying to figure out what to do with the house you bought together (and the subsequent mortgage) now that you are getting divorced.
We’re here to answer a few of those questions you may have about mortgages & divorce.
As the age old saying goes: love fades but mortgages are forever
Or at least until the end of their predetermined term.
So you bought a house together and now you are trying to find a way to “divorce” the mortgage so it does not remain all your responsibility. The first and, perhaps, the most obvious is to sell the house. Depending on the housing market at the time, this may be your best option. Once the house is sold, you can pay off the mortgage and use any additional funds to put towards your new living space. This is, of course, the ideal situation.
But there are many homeowners who owe more on their home than it is actually worth (or they can actually sell it for). In this situation, a short sale may just be the way to go. While this may be a more difficult decision to make, especially because it will tarnish both of the borrower’s credit scores, it is one way to sell and put the joint debt behind you.
Let’s say those two options are out of the question. Another viable route to take is determine if one party should take assume the house payments. If one is able to afford to take over the payments on their own, they can refinance the mortgage in their own name. And, just like that, the joint debt you had together goes away (or at least remains in one party’s name).
Now, another option that many people don’t consider is renting. While not as glamorous as selling the house and being “done” with it, renting is an excellent way to make those monthly mortgage payments. At least until you owe less on your mortgage and selling is a possibility.
So, unless the two of you are going to continue living in the same house together (and continue to pay off the mortgage, also together), one of these options is going to be your best bet to get out from underneath your joint debt.
Mortgages and divorcees
Maybe you are recently divorced, been divorced for years, or are in the process of finalizing the paperwork. You’ve ended a relationship and, possibly, lost the home you were once living in. But that doesn’t have to mean you have lost a “house” forever.
The first thing to remember is… Protect your credit score! Going through a divorce, itself, is not going to damage your credit score. But while in the midst of a divorce, it can be easy to overlook bills and loan payments. Once bills are more than 30 days late creditors can report them to the local credit bureaus. And this will affect your personal credit score.
The same rules apply when you are divorced and looking to buy a home, as when you and your partner were looking to buy a home. The only difference is that, now, you have gone from a dual source of income to a single source of income and, if you are paying alimony or child support, have less money than you did before.
So, when considering purchasing a house again, it is important to consider if it is the best decision for you, at that time. And, a very good rule of thumb, do not buy a home while you are finalizing the divorce proceedings! Even if you have an unlimited source of income, there are too many “what if’s.”
Now, once the divorce has been finalized, take a good look at your finances to see if it is something you can realistically afford on your own. If your ex is still living in the home you two shared, be sure that the mortgage has been refinanced in their name. Doing so will limit the amount of debt you have in your own name, ultimately making it easier to be approved for a mortgage.
Next step? Get pre-approved! The pre-approval will allow you to know what financial framework you are working in before you start looking at homes. That way, you can shop, realistically, for the new home of your dreams. And as you are searching, don’t forget about the other “hidden fees” that can pop up along the way.
Have questions? Wondering if you can be pre-approved for a mortgage? Give us a call- we can discuss your unique situation.