A house is one of the biggest investments you make in life. Therefore, it goes without saying that a mortgage is one of the biggest financial responsibilities you will take on in your life. However, how will you handle the mortgage if you and your spouse face a divorce?
Questions to consider
If you wish to keep your home, there are quite a few options available to manage the mortgage. You might refinance the mortgage or keep the agreement as it is, with both spouses continuing to make payments. However, the option that works for you will generally depend on the answers to these two questions:
- How will you handle the house? The family home is one of the most important issues to tackle when determining how to divide marital property. In many cases, how you decide to deal with the house can significantly influence how you handle the mortgage as well. For example, if you determine you will keep the house and buy out your spouse, it is possible that you might assume the loan. However, both you and your spouse might divide the mortgage payments fairly as well. It depends on what is equitable and what works for your situation.
- What will your finances look like post-divorce? It is critical to carefully consider your financial situation before a divorce. Calculate your overall budget and factor in how the division of marital property will affect your financial future.
Remember, financial institutions and mortgage lenders will not accept the divorce decree or agreement as the new plan for payments. It is your loan agreement that matters to them. So, you must ensure the loan agreement reflects any agreements you reach in your divorce.
Financial planning is an important step
It bears repeating that it is essential to organize your finances before you move forward with a divorce. This will help you determine where you stand as you navigate the process of divorce, as well as figure out what is feasible for your future. Understanding both of these factors is important as you and your spouse negotiate how to handle the mortgage payments.