If you're going through a divorce and own a home with your soon-to-be-ex-spouse, one of the most important decisions you'll need to make is what to do with the mortgage. This can be further complicated if you have children and don't want to uproot them from their childhood home. Ultimately, there are a few options worth exploring, but you should be sure to speak with a divorce lawyer to determine which is best for your needs and finances.
Sell the Home and Divide the Profits
In some cases, the smartest option may be to simply sell the home and split the profits 50/50. This allows for a "clean break" where both spouses are able to enjoy a fresh start in a new space without having to worry about who will pay off the existing mortgage. Of course, there are situations where selling the home may not be feasible. For example, for those with children, selling the home may be too stressful or difficult (especially during the school year). In other cases, the couple may owe more money on the mortgage than the home is currently worth or may have a hard time selling it for a profit in the current real estate market.
Refinance the Mortgage
If selling the home and splitting the profits isn't a viable option, then it may be best to refinance the mortgage with only one of the spouse's names on the new contract. This allows the other party to legally absolve their financial responsibility on the house, allowing the other person to assume ownership and responsibility of the once-shared home. Of course, this arrangement is contingent on the divorcing couple being able to reach an agreement on who should keep the home.
A Note About Keeping the House
It is common to develop emotional ties to a home, but if you're thinking about keeping the home in your divorce, be sure to meet with a financial advisor to be sure you can comfortably afford it--especially when you take into consideration all the costs and expenses related to finalizing a divorce. The last thing you want is to end up missing payments or going into foreclosure on a home that you cannot afford on your own.
Facing a divorce can be difficult enough without having to figure out what to do about a shared mortgage. By weighing these options and speaking with your divorce lawyer, you can ultimately reach the right decision.
For more information on choosing a family lawyer, check out a firm like Bineham & Gillen, PLLC.