Divorce: How It Will Affect Your Mortgage

Divorce: How It Will Affect Your Mortgage

Unfortunately, you can get a divorce from your spouse, but you can’t get one from your mortgage. Dealing with a joint mortgage, and therefore joint debt can be one of the most aggravating things when it comes to divorce. During the divorce proceedings, married couples or common law partners will be splitting up their assets and their liabilities, i.e. their debts. A mortgage is typically the largest of your debts and has to be dealt with in a reasonable manner, even when there’s tension going on at home. Your divorce is not your lender’s problem, so if you want things to go smoothly when dividing your mortgage, it’s better to put personal issues on the back burner until the ordeal is over.

Often, when buying their first house or property, many married, or common-law couples fail to think about the consequences of dealing with a joint loan if, and when the relationship should end. If you and your partner have found yourselves in a similar situation, the article below will provide you with a bit of information on how to split your joint mortgage so that both parties should end up satisfied.

Find Out What The Home Is Valued At

The first thing you and your spouse should do, before trying to portion out both your personal properties and your mortgage, is to get an idea of what the home itself is going to be worth on the real estate market. As your household will most likely be the most valuable, and therefore expensive piece of property that you own, it can be tricky to split up fairly. One thing you can to do get a solid value on the house is to hire a realtor or a real estate appraiser. They’ll evaluate your home and tell you about any issues that will cause the property to either drop or climb in value.

Once your home has been appraised, you can deduct the current mortgage debt you still owe from the estimate that the realtor or appraiser has given you. This should leave you with how much the home is worth, or how much equity it has. Note that both you and your partner will remain solely accountable for dealing with the mortgage unless you manage to get the home sold, or should you decide to refinance it. If neither of these options isn’t possible, make sure to look into other solutions.

Possible Solutions


Selling Your House

The simplest way of dividing your mortgage would be to get the house sold on the market. In this case, a couple can get rid of the property immediately, then devote the rest of their time into paying off what remains of the mortgage, before dealing with the other aspects of the separation. This will save you having to deal with built up interest fees, not to mention stress. There’s no need to drag the process out for longer than it needs to be.

In some cases, the home itself might be worth less than the mortgage owed. Here, you can list the home as a “short sale,” selling it for as much as you can get, and use the funds to finance part of your mortgage (read this article for more information on short sales). While it will most likely have consequences for both your credit scores, a short sale can actually be more beneficial to you than retaining your mortgage. Depending on the situation, during a short sale, your bank can even enable you from having to pay what remains on the mortgage.

Whatever the situation may be, if a separation or divorce is on the table, it’s best not to wait to put your home up for sale. Set your personal issues aside, and take the time you need to get your property sold for as much as you can possibly get. After all, selling your home at the last minute could result in you getting a lot less than you desire, or what it’s actually worth.

Refinancing Your Home

Another possible option when it comes to dividing your mortgage would be to refinance so that it becomes the liability of one spouse instead of both. While this is an easy and effective option, it can also be an expensive one for the spouse who transfers the mortgage under their name. While that spouse gets the home, they also acquire a slew of extra costs for having to switch the mortgage over. Having your mortgage refinanced will mean having to pay legal fees, as well as an appraisal fee. Your lender might even tack on a fee for discharging you from the mortgage. So, even though refinancing your home might sound like a better option, remember that it comes with extra costs. As your divorce will probably be pricey as it is, see that you have enough extra funds to deal with refinancing your home, if that is what you’re planning to do.

Make sure you consider this: depending on your situation, refinancing is not necessarily the better choice. The spouse who is holding onto the property has to live up to specific standards that will prove he or she can deal with the rest of the mortgage by themselves:

  • Before separating, the spouses have to be up-to-date with current mortgage payments (i.e. all payments have been, and are going to be on time).
  • Qualifying for refinancing requires at that least one of the spouses has a favorable credit history and score, as well as a solid income.
  • One of the spouses must agree to sign over the home to their partner.

We need to mention again that refinancing might not be the better solution, because of these taxing standards. On top of this, upkeeping the home can become an issue, as it’s often hard for one person to deal with all the maintenance by themselves. Make sure you consider beforehand, that it could be a serious problem dealing with these issues on your income alone. If this is the case, refinancing is definitely not a good idea.

Keeping The Home, With Both Spouses’ Names On The Mortgage

In the event of a separation or divorce, when a couple is having trouble agreeing on a settlement, and are unable to get the house sold, or refinance it, both their names can remain on the mortgage contract, while one of the spouses takes their leave. Generally, this solution should only come about if there’s no other choice. It’s the least beneficial option for both spouses, as their mortgage payments and any other costs associated with their house must be stated when applying for any loans or other credit in the future. Therefore, doing this can impede one or both spouses from acquiring another mortgage, and become financially problematic.

Are you a woman who’s worried about dealing with your finances post-divorce? Click here.

Responsibility is Key

A separation or divorce can be an extremely difficult and painful period in your life. However, it’s crucial to get your financial situation in order, as it will benefit you in the future to maintain a solid credit report. Whatever the solution to your joint mortgage might be, it’s best to keep up with your payments and make sure they’re always made on time and in full. This will ensure that your credit score remains positive. When it boils down to dividing your mortgage, being financially responsible during your divorce will help you get most favorable solutions.

Sign Up for E-mail Alerts

Get updates on Rebound Finance news, deals and offers.


All consultations and conversations with Rebound Finance and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster.