When a marriage ends in divorce it can be an emotional and complicated time. According to the CDC 34% of married women over 20 years old and 33% of married men over 20 years old have been divorced. The decision to end a marriage is the first of many that need to be handled to settle the divorce. One of those major decisions is determining the next steps for how to handle the ownership of the shared home and the mortgage on it. There are several ways that couples may choose to handle the allocation of their home.
Selling the Home
The straightforward way of handling the division of a home during a divorce is to sell the home and share the profits as part of the divorce. Then both parties can divide the earnings and purchase a new home as they see fit.
This is the easiest way to come to a confident agreement about the value of the home and the existing mortgage would be paid off through the sale.
Refinancing the Home
Should one person decide to keep the home the best way to remove the ex spouse from the mortgage is to refinance the loan. This can be challenging if interest rates have gone up or the remaining owner has trouble qualifying for a loan of that size with only their income. Refinancing also allows the remaining owner to refinance the home and take out enough money to pay the former spouse for their half of the house.
It is important for both parties that only the spouse retaining ownership be on the mortgage. Keeping both on it even in an amicable split can cause issues if the spouse who moved out wants to buy a new home, they will have the mortgage on their credit impacting what they can afford. It would also be risky if the remaining spouse were to default on the loan, it would negatively impact both. It is not recommended for both parties to stay on the home loan after a divorce.
In the unique scenario where only one persons name is on the mortgage but both of their names appear on the home deed they can execute a quitclaim deed to have one name removed from the title records for the home.
Should the spouse who is keeping the home still need to pay the ex spouse for their half of the home’s sale value they would need to have another means to pay that.
The easiest way to determine how much a home is worth is to list it for sale and split the profits. If one person has decided to keep the home it can be a bit more complicated to figure out the buy out. You will want to hire an appraiser to identify the fair market value for the home and calculate the profit margin after paying off the existing loan and come to an agreement.
In the case of a split that is not amicable the process of agreeing on the appraised value can be tricky so it may require the assistance of local real estate professionals.
Divorce can be a stressful thing and the emotions surrounding it can be strong. It is important as you proceed to remember that not paying joint bills can result in a major hit to the credit scores of both parties. Try to avoid decisions that will impact your credit history for years to come while navigating a divorce in the Upper Valley.
If you are going through a divorce and looking to buy a home in the current Upper Valley real estate market and beyond, you need a team of local real estate experts on your side. Our team is well versed in a variety of loan programs including fixed mortgages, ARMs, VA loans, FHA and more! We have the privilege of partnering with the best local agents, appraisers and attorneys the Upper Valley has to offer. When you work with Legacy Mortgage you are working with the best local professionals from beginning to end. Reach out to the Legacy Mortgage team to get the loan process started. Call us today, 603-643-7400.