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How a mortgage is handled in a Texas Divorce

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, PLLC 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 Bryan Fagan

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 contact the Law Office of Bryan Fagan, PLLC. One of our licensed family law attorneys is available six days a week to answer your questions in a free of charge consultation.