Mortgages and Divorce

Mortgages and DivorceDivorce is often a difficult and unsettling experience. It can also be confusing, especially for spouses who shared a number of different assets during the marriage. Unraveling financial ties can be difficult, but it is important that you not overlook this part of the divorce process. One of the most important financial aspects of divorce often centers on the couple’s mortgage. It can be overlooked, but doing so can have extremely negative consequences on your financial health now and in the future. This post offers some helpful information as well as reminders when dealing with mortgages and divorce.

Sell or Stay

One of the most difficult questions people face when it comes to divorce is what to do about assets, especially real property. Determining an approach to what to do about a shared home often involves the discussion of whether to sell the home or allow one spouse to stay in it. There are many considerations to take into account when deciding this.

For example, is the spouse that wants to remain in the home capable of handling the monthly payments on his or her own? They will need to look into refinancing the mortgage in only their name, so it is important to make sure that they have the credit and other requirements for refinancing approval as well as that they can realistically afford the home on their own. Relying on support payments in an effort to remain in a home is not a good idea, especially given that such support can be modified or terminated in the right circumstances.

From a logical and legal standpoint, it is often easier to sell the house. However, doing so can be difficult and depends on a number of factors. What is the current housing market like? How much equity is in the home? Is there substantial sentimental value in the home? Your Florida divorce attorney can help you understand how profit is divided if a home is sold during or as a result of a divorce.

Make Sure You are Off the Mortgage

It is extremely important to remember that your name remains on the mortgage even if you have forfeited your interest in the home itself by filing a quitclaim deed for your share. That means you will still be liable for the mortgage in case of missed payments or other issues, and you may not be aware of such issues until it is too late if you are no longer residing at the address where such notices are sent. This can have a devastating effect on your credit score, which can minimize your financial ability to purchase a home or other assets for yourself that require credit. Even if your spouse remains current on payments, the balance on the home can still tie up your credit if you are trying to purchase a home for yourself or other assets that require substantial credit.

In some situations, it may actually require obtaining a court order to have your name removed from the mortgage or enforce other property-related aspects of a divorce settlement if one spouse does not comply. You need to be prepared to take the steps necessary to ensure your name is no longer associated with the home or mortgage, even if those steps are unpleasant for you and your former spouse.

When Selling is Not an Option

If the housing market has dipped or you have little to no equity in the home, it may not be practical to sell, even if neither spouse wishes to remain in the home. There are a number of potential options available.

Some former spouses choose to rent the home out and use that income to make mortgage payments. If you determine that this is the best route for you, you should make sure to address how the income from the home will be distributed and how you and your former spouse will ensure all bills are paid. Even if you trust your former spouse, make sure you consistently check on finances related to renting a home. Failing to do so could cause you significant financial hardship if a payment is missed. You may also need to consider tax-related issues that could affect income from the home and make sure that your divorce and support agreements, if any, detail how these issues will be addressed.

You may also want to short sale the home. While doing so can have a negative impact on your credit score, it is a far better option than risking foreclosure due to divorce or getting nothing out of what has been put into the home.

Selling early in a divorce can also be difficult. If you have moved out of the marital home, do not think that you are not still responsible for your share of the mortgage.

Legal Assistance with Your Florida Divorce

Mortgages and real estate are only one part of dividing assets in a Florida divorce. There are many other assets to consider including retirement accounts, investment accounts, insurance policies, vehicles, and even pets, among others. It is a good idea not to finalize your divorce until necessary financial paperwork related to issues like the mortgage has been prepared and filed. A Florida divorce attorney who focuses on the Florida divorce process understands the nuances of property division in Florida and how mortgages come into play. If you are considering a divorce or have already made the difficult decision to pursue one, contact Scott J. Stadler to schedule a consultation and find out more about how mortgages and other financial matters are handled in a Florida divorce.