Beyond being a mentally and emotionally strain on your life, a
divorce can also turn your finances into a mess if you are not careful. The assets and
property that you have worked your entire adult life to accumulate- your home,
your vehicle, your investments- are all potentially divisible in your
divorce case. This means that your spouse may be entitled to receive money
in exchange for you keeping these items. In the case of your home, it
may be decided that your spouse should remain in the home while you are
forced to seek shelter elsewhere.
An obvious concern, then, would be what will happen to your home
mortgage once your divorce is finalized. Clients of the
Law Office of Bryan Fagan will commonly ask questions about this subject so I wanted to write a
blog post on this subject. If you and your spouse are able to negotiate
a settlement, rather than proceed to a contested trial, then the conclusion
of your divorce can be less costly and far less havoc-filled for both
you and your spouse from a financial perspective.
Selling your home vs. One spouse paying future mortgage payments
The reality of the situation is that with a home, there really is not a
lot that can be done with it. You and your spouse can either choose to
sell the home or to have one of you remain in the home and begin to make
payments on the mortgage without the other having any responsibility to
do so. In my opinion, and is often the opinion of judges, the cleanest
and best option is typically to sell the home as a part of the divorce
decree. This means that you and your spouse will agree to hire a realtor,
put the home on the market and then have the home sold within the parameters
set forth in your
Final Decree of Divorce. Selling the home and then dividing up the equity can assist both you
and your spouse in getting back on your feet financially after a divorce
concludes. As your family dynamic has now been changed, there is good
reason to believe that neither you nor your spouse will want to remain
in that home much longer.
From an emotional standpoint selling your home as a result of a divorce
can be extremely difficult for some people. You may be thinking to yourself
that your home is where your children lived their entire lives and that
all their memories are associated with sleeping in their room in that
specific house. You may also look to your home as a safe harbor- something
familiar that you can take solace in during this extremely difficult time
in your family’s lives. Indeed, deciding to sell a house can be
much more difficult than deciding to sell a vehicle or other piece of property.
If this is similar to your line of thinking, I will caution you to consider
that a home is made up of four walls and a roof. While you and your family
may have made great memories in that home it is, at the end of the day,
a place whose primary purpose was extremely practical- to house you and
your family. There are other places to live that may suit you and your
family better now that a divorce is on the horizon. I frequently counsel
clients to think one, five or even ten years into the future when deciding
what should be done with the family home. From my experience the odds
are good that your unwillingness to consider selling the home comes from
an emotional attachment rather than a rational analysis. There is nothing
abnormal about that but if you can set aside your emotions and consider
the long term future of your family selling the house is often the best
option in a divorce.
What if my spouse or I want to remain in the home?
If after much careful thought you and your spouse determine that one of
you should remain in the home, then it is necessary to consider whether
either of you will qualify for a refinance of the mortgage based only
on your income and not the combined incomes of you and your spouse. It
would behoove whichever of you will remain in the home to contact a lender
to see if you can pre-qualify for a refinance of your current mortgage.
If you receive word back that a refinance is possible then working with
the lender to begin the process in conjunction with the terms of your
divorce settlement is essential to beginning this process correctly. Whatever
share of the home’s equity that you are entitled to out of the divorce
will come from the proceeds from the refinance as well.
The mechanics of one spouse remaining in the home and the other leaving
is straightforward. Let’s assume for a moment that you have decided
that you will leave the home and your spouse will remain in the home and
assume the payments on a refinanced mortgage. From your perspective, you
do not want the liability of having to make payments on a home if your
spouse fails to do so. A
Deed of Trust to Secure Assumption will be signed by your spouse stating that future payments on the home
will be assumed by him or her. This absolves you of future liability of any kind.
On the other hand, your spouse will want some assure that legally you can
stake no claim on the residence after the divorce. To help secure this
peace of mind for your spouse, you will sign and execute a
Special Warranty Deed. This sort of deed transfers your interest in the home to your spouse.
Your spouse will have all the rights to the property, but your name would
remain on the mortgage. A Special Warranty Deed will allow your spouse
to secure the refinance that you desire and that he or she needs to take
over payments independent of your income contributions.
Additional questions on Mortgages and Divorce? Contact the Law Office of
Your home is one of the most significant assets that you will ever own
and handling it and your home mortgage is an essential part of many divorces.
To learn more about this process please
Law Office of Bryan Fagan. One of our licensed
family law attorneys is available six days a week to answer your questions in a free
of charge consultation.