If I get a divorce, who pays the Mortgage

A divorce is one of life’s most traumatic experiences. It brings so much pain and it can make you feel like a failure or a loser. It can also have negative effects on your finances and other facets of your life.

No sane person expects they’d be divorced. But, the statistics reveal that if 10 people get married, 5 will be divorced. So, it’s a huge possibility.

If you have children, you’d most likely experience much more pain, because you’d feel as though you’ve betrayed them and because you may not be able to see and interact with them as much you’d like.

In some cases, you and your ex may even become enemies! Trust me; if you can help it, you want to avoid ever getting divorced. Unfortunately, life does not always turn out the way we’d like it to. It’s wise to be proactive and learn what we obligate ourselves to when we sign vital contracts.

Simple, but Intricate

There are many issues to deal with when a marriage is legally declared dead. One of such issues is: Who pays the Mortgage? You’d agree it’s an important question. It is simple, but it has many intricacies, as you’d see in this article. As the saying goes, the Devil is in the details. 

One of the key reasons for the intricacies is the concept of marital property. The property that you or your spouse acquired, as individuals, or jointly while you were married is regarded as marital property.

It’s seen as jointly owned property. It follows that property acquired before marriage is not marital property. The concept arose out of the desire to protect both parties in a marriage. And it is relevant in our exploration of how divorce affects mortgage payments.

If you and your ex can settle the issues relating to the mortgage amicably, fine. But it’s also wise that you seek the services of a divorce attorney and a financial planner, because as mentioned earlier, there are some intricacies, and these could obligate you. You need to be very careful.

Some Key Issues

Which state are you residing in? Who gets to keep the house? Are you still going to continue living together? How was the house titled and financed? What are the terms of the divorce decree?

Was the divorce peaceful or was it stressful? It stands to reason that the more peaceful the divorce, the easier it’d be to make decisions on finances and mortgages. These are some of the factors that affect the issue we are looking at.

  Now, let’s look at three key different scenarios. They are:

·       You could sell the house

·       Joint Mortgage means Joint Liability

·       Refinancing the house

1.    Sell the house

In order to eliminate the complications which may result from deciding who pays the mortgage, who gets the house, who pays for expenses incurred on renovations and maintenance of the property... some couples deem it wise to sell the house, provided there’s still equity in it. They sell it, pay whatever is outstanding on the mortgage and share the proceeds. This is a neat arrangement. Each can now decide to do whatever they please with their share of the proceeds. In this scenario, no one pays any mortgage after the sale.

If you decide to keep the house, what is the implication and who pays the mortgage? That’s what we’d explore next.

2.    Joint Mortgage means Joint Liability

If your name and your ex’s are on the mortgage contract when the house was bought, while you were both married, both of you are jointly liable. It does not matter whether you or both of you still live in the property or not. It means that either of you is liable, even if the other person fails to pay.

Naturally, the mortgage company wants the full amount paid each month – they won’t be impressed if you claim, for example, that you have your half of the debt, and that it’s your ex that’s delaying, or, that you no longer live there. So, in this case, both parties have to pay.

Ideally, you should have a written agreement that’s co-signed by your spouse that both of you will make your mortgage payments each month –unfailingly. The mortgage company is not going to cut you any slack because you’re now divorced.

If the payments are not made, your credit ratings will be negatively affected. This could make things difficult for you and your ex if you want to access credit in the future. If these payments are not made for some time, the lender may start repossession proceedings.

But, you may decide that the wise thing to do is that you, alone, own, keep, and pay the mortgage. Let’s look at what that entails.

Refinance Mortgage into your own name

Let’s be honest, the last thing you may want after a divorce is whatever still creates joint obligations for you and your ex, especially if it was a difficult marriage and if you had a contentious divorce.

So, you may prefer a situation where you’d refinance the mortgage into your own name, and that you, alone, own and live in the house. When this is done, naturally, you, alone, will be making the payments. It also means that your spouse no longer has obligations to make the mortgage payments. Since the new mortgage note will be in your name.

Refinancing a mortgage means that you take a new one, pay off the debt on the old one, and effectively, the old mortgage and its terms no longer exist. This is usually done to take advantage of more favorable terms, like a lower interest rate.

In this case, your income and credit score are what’s relevant. In effect, you may have to “buy out your ex”. Or, if they are very understanding, it may be a peaceful, verbal agreement. But, the change needs to be effected on the mortgage contract.

You’d need your ex to formally transfer the title to you, before you refinance. If this is not done, they’d still legally own a portion of the house, even though you alone will be making the payments! So, you need a legal means of ensuring the transfer. What you need is a Quitclaim Deed. What is that? I am glad you asked.

A Quitclaim Deed is the legal instrument that’s used for transferring ownership of real property. The person making the transfer is called the grantor, while the recipient is the grantee. By signing the deed, the grantor agrees they have quit any claim to the property. The property now belongs exclusively to the grantee.

In conclusion, we have mentioned some of the situations that could arise when there’s a divorce, which complicates the issue of who pays the mortgage, and we have also explored three key options, which could lead to peace of mind. Of course, it’s wise to also consult an attorney for more clarifications.

Michael Newman

P.S. The article above (written by me) is the property of a client of mine.