Bridget's Blog

head_left_image

DIVORCE and MORTGAGE DEBT, WHO’S RESPONSIBLE?

DIVORCE and MORTGAGE DEBT, WHO’S RESPONSIBLE?

 

Divorce is never easy...if there's a family home and mortgage involved, who is responsible to make the payments?

 


In most divorce negotiations the disposition of property is often one of the most contentious (after custody and child support). 

Many times one spouse will remain in the marital home and, if both parties are on the mortgage, the spouse that stays will be required to refinance the mortgage.

BEWARE:   Though the marital contract is severed with the divorce decree, the credit contract (the Mortgage) is not released until the home is sold or refinanced

divorce and mortgage

 

 Until you are off the mortgage loan, your credit will be affected by both on time and late payments.. Even if you are not responsible for making the payments on the property per a separation agreement or divorce decree, you will still need to stay on top of the payment activity to ensure that the mortgage is paid on time until the loan can be refinanced.  Late payments may affect your ability to buy or even rent elsewhere.

 

 WHAT ARE MY OPTIONS?

 

Selling the home is one option, though uprooting the entire family may not be the best for everyone in the midst of what is already a very emotional time.   Selling will involve its own set of costs that must be considered and selling a home that is underwater will affect everyone’s credit in the event of a short sale.

 

Alternatively, if one party is planning to refinance the mortgage on their own and stay in the home, they must qualify for the full mortgage on their own, or bring in additional borrowers to qualify.  If there is or appears to be equity, be sure to consider the cost to sell in calculating a fair buyout for the one who will leave.

If the divorce or separation agreement involves child support or separate maintenance (alimony), it will be counted as debt for the payer.  Child support or separate maintenance won't count as income for the payee until after several documentable payments have been made. (How many payments are required can vary by loan program and lender).  Talk to your lender about the best way to document receipt.

As you go through this difficult process seek out counsel for your property settlement from competent professionals who can work to make this part of a difficult situation the best it can be. 

 

DIVORCE and MORTGAGE DEBT, WHO’S RESPONSIBLE?

 

Warm Regards,

Bridget McGee  Maryland Mortgage Mama  NMLS# 196068  SWBC Mortgage.   410-960-2061 EHO   bridget.mcgee@swbc.com or www.marylandmortgagemama.com

 

If you are considering purchasing a home in Maryland and want to be sure you are mortgage ready, my brother Tony and I will be happy to help! We help to make the mortgage process a pleasure! 

If you already own your home, we are happy to provide a no-cost mortgage review to help you to determine if refinancing may be in your best interest.  Please contact me at 410-960-2061.

Comment balloon 8 commentsBridget "Mortgage Mama" McGee • August 12 2014 11:44AM

Comments

Bridget- this is excellent information for anyone or any couple considering a divorct.  That was a good reminder that even though the marriage contract may be severed the obligation on the mortgage remains.   Spouses need to remember this.

Posted by Kathy Streib, Home Stager - Palm Beach County,FL -561-914-6224 (Room Service Home Staging) over 5 years ago

Your title got me to thinking about which is the greater weight to bear - an ex or a mortgage? Me thinks the mortgage will go away some time!

Posted by Gary L. Waters Broker Associate, Bucci Realty, Fifteen Years Experience in Brevard County (Bucci Realty, Inc.) over 5 years ago

Excellent article full of information many folks may not realize but need to know. This can be a very complicated situation.

Posted by Susan Haughton, Susan & Mindy Team...Honesty. Integrity. Results. (Long and Foster REALTORS (703) 470-4545) over 5 years ago

Kathy, Thank you.  Divorce is never easy, no matter who makes the decision. The folks going through this are dealing with so much more than just a financial transaction, it is very emotional.

Gary, Divorce is expensive for sure.

Susan, It is very complicated and folks really need to work with professionals who understand what they are going through.

Posted by Bridget "Mortgage Mama" McGee, Maryland Mortgage Mama NMLS#196068 (SWBC Mortgage 410-960-2061) over 5 years ago

Great information. While I have no plans to use this information personally, it is an important point to remember when being a joint owner of debt.

Posted by Gerard Gilbers, Your Marketing Master (Higher Authority Markeing) over 5 years ago

I've had buyers time after time not qualify because they relied on their "divorce" papers which had NOTHING to do with the loan they were on.

Posted by Tammy Lankford,, Broker GA Lake Sinclair/Eatonton/Milledgeville (Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668) over 5 years ago

This is a very informative post and couple need to know what occurs regarding the mortgage and the ability to purchase property  by the spouse who does not remain in the marital home.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) over 5 years ago

Bridget excellent advice.  To many couples going through a divorce rely strictly on the advice of their Attorney when it comes to the property.  This many times results in receiving bad advice because Divorce Attorneys are not familiar with lending guidelines.  The end result is one or both spouses being in a very bad position.  Anyone going through a divorce would be wise to contact a trusted lender and seek advice on how to handle the wording for the disposition of the property in the Divorce Decree.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 5 years ago

Participate