Dealing with a divorce and mortgage can be a complicated matter that affects your financial and legal interests. Here are some additional things to consider when making decisions related to your divorce and mortgage.
Divorce Mortgage Payments After Separation
If one spouse leaves the home, he or she is still usually required to maintain mortgage and insurance payments on the marital property. Since the property will probably be sold or one spouse will be bought out, it is usually in both spouses’ best interests to maintain the property and avoid defaulting on the loan. If you think you may have trouble getting your spouse to be responsible while your divorce case is pending, you may need to ask a lawyer for help with establishing a temporary order from the court that outlines your spouse’s responsibilities.
Responsibility of Mortgage Payments
Until you refinance the mortgage on your house, whoever was on the original mortgage is still liable for the payment of the mortgage. Even if your divorce decree says that your spouse is responsible for the mortgage payments, if you fail to make payments, your lender may take action against you. The mortgage company is not a party to your divorce and does not have to obey orders from the court, so your divorce decree does not affect the contract you have with your lender. However, if your spouse is not meeting the obligations laid out in the divorce decree or settlement, you may be able to seek recourse from him or her through a contempt of court action. If you are depending on your spouse to make mortgage payments during your separation or after divorce, be sure that you have a way to check that these obligations are being met.
Costs of Refinancing
When considering your options, take into account the full costs of refinancing, such as having to pay extra fees or a higher interest rate. Your refinanced terms may affect you for 30 more years.
Even if you and your spouse agree that one of you will refinance the house and buy the other one out, the lender may not agree to a loan modification due to divorce. Additionally, if you pursue a contempt action due to a failure to refinance the property, your spouse may be able to show that he or she tried to refinance the property in good faith but was unable to get approval from a lender. If this occurs, you may need to consider other options, such as keeping the mortgage as-is or renting out the property.
Choosing the House Over Other Assets
Some divorced couples agree that one spouse will keep the house while the other one gets other assets equal to their financial stake in the home. It is important that you carefully consider the short-term and long-term implications of this type of arrangement. For example, if you keep the house and your spouse keeps more liquid assets like money in the bank, you may not have funds in case of an emergency. Or, if your spouse keeps their retirement account intact, you may have a less valuable asset over time than your half of the retirement account would have constituted.
Consult With A Lawyer Or Financial Planner
Divorce can potentially impact your financial standing and wellbeing for years to come, so it is important that you seek assistance from a legal professional or financial planner. These professionals can help you make informed decisions about your financial future and help you consider different scenarios based on the decisions you make during this pivotal time.