Mortgage Blog

How to get a home loan

What happens to a mortgage in a divorce?

One of life’s most difficult events is when married spouses decide to separate and end their marriage through a divorce. Statistically, one out of two married households deals with the emotional, financial, and legal challenges of divorce. One big hurdle the spouses will face is what happens to their mortgage in a divorce on a jointly owned property.

In this blog, we’ll cover the important information you need to know, the best steps to take, and assembling an experienced team to help you.


Who is responsible for the repayment of the mortgage?

The first thing to remember: When both spouses are named on the mortgage on a primary home, both spouses are financially responsible for repayment of the mortgage.

If the separated spouses finalizing a divorce are not clear on who will remain in the home and is responsible for the primary home expenses, this can lead to missed or late payments on the mortgage, which will negatively affect each individual’s credit profile.

Reaching an understanding as early and quickly as possible is critical. This can be done through a simple agreement, mediation, or an uncontested divorce that documents which individual is responsible for repayment of the mortgage loan, insurance, property taxes, assessments, and utilities. Even one missed or late mortgage payment will instantaneously deteriorate the personal credit profile of an individual. This will impact other financial and credit needs for either individual going forward.


How do you remove someone from the mortgage?

When and how the mortgage should be refinanced to remove the departing spouse from the mortgage on the primary home is another important point to discuss. This allows the departing spouse to be removed from title and ownership of the primary home and most importantly be removed from the obligation of repayment of the mortgage loan. The impact of not discussing this topic can lead to the departing spouse being challenged or denied access to new credit because of excessive or high debt to income.


Make it easier by assembling a team of experts.

While this life event for divorcing spouses certainly requires the service of counselors, mediators, and family law attorneys, these other professionals also benefit from subject matter experts who can answer, explain, and develop a plan for the divorcing spouses and their team of professionals. The efforts of each service provider are intertwined and must complement the other to help you with the challenges of this life event and beyond.

According to Andrew Engle, Attorney Partner at Davis Friedman, “There are many financial issues a divorcing spouse must consider. That being said, few are more important than the proper disposition of the marital residence, or investment properties. For many families, the marital residence is their most valuable asset. If the disposition of the property is not handled properly in the divorce, and in the Marital Settlement Agreement, the parties could face expensive and contentious litigation in the future. It is crucial to work with an experienced professional on both the financing side and the legal issues to make sure the transition is smooth.”

When and if you know someone who will face this life event, feel free to contact me for a consultation. We can help you line up a team of experts to make this process easy for all parties involved.

Schedule a time to talk

You may also like:

Can you refinance your current home before buying a new one?

Refinancing your current home before buying a new one can require some mortgage gymnastics. We'll need to look into DTIs, LTVs, and loan limits.

Is it time to refinance your home?

It might be time to refinance your home. Mortgage rates are low, and you could potentially get rid of mortgage insurance by refinancing.

How to cancel your mortgage insurance and save money

If you put less than 20% down on your home, you need mortgage insurance. But that doesn’t mean mortgage insurance is permanent. By canceling it, you can save hundreds of ...