Mortgages & Divorce: Who Pays?

Going through a divorce is a challenging and emotional experience, and it can be further complicated when it comes to handling the mortgage on the marital home. At James E. Crawford, Jr. & Associates, we have been helping clients in Maryland, Virginia, Pennsylvania, and DC deal with their mortgages during and after divorce since 1962. In this article, we will explore what happens to a mortgage during a divorce, who pays, and how to protect your financial interests.

Who Pays the Mortgage in Divorce?

The mortgage payment and the real estate itself are two separate issues. If both spouses’ names are on the mortgage, you’re both on the hook for it, even if you get a court order requiring your ex-spouse to make mortgage payments. This means that if your ex-spouse fails to make payments, it can negatively impact both of your credit scores and potentially lead to foreclosure.

Therefore, it’s crucial to figure out your options. Do you sell the home? Does your ex-spouse (who has primary custody of the kids) stay in the home? Who pays how much of the mortgage?

Protecting Your Financial Interests During Divorce

Refinancing can remove the name of one spouse from the mortgage, typically the spouse who doesn’t own the home. This way, you’re no longer on the hook for past due payments.

Here’s a typical scenario:

• The ex-wife, who has primary custody of the children, stays in the home for three years, during which the ex-husband pays a portion of the mortgage.
• After those three years, the house is sold, and the proceeds are divided.

This scenario is quite common because it provides some measure of stability for the children, who benefit from not having to move and continuing to live in the home they’re used to.

During a divorce, the mortgage on the marital home is typically handled through a few common avenues: selling the property and splitting the proceeds, one spouse buying out the other and assuming the mortgage, or refinancing the mortgage in one spouse’s name. The specific approach depends on the individuals’ financial situations, the terms of their divorce settlement, and the lender’s willingness to cooperate.

• Selling the Property: If both spouses agree, the property can be sold, and the proceeds from the sale are divided according to the terms of their divorce settlement. This is often a straightforward option when neither spouse can afford the mortgage on their own or when both want to move on.
• One Spouse Buying Out the Other: One spouse can choose to buy out the other’s share of the property and the associated mortgage. This usually involves one spouse refinancing the mortgage in their name alone or assuming the existing mortgage with the lender’s approval. The spouse remaining in the home must be able to demonstrate their ability to handle the mortgage payments on their own.
• Refinancing: Refinancing the mortgage in one spouse’s name allows the other spouse to be released from liability. This requires the spouse remaining in the home to meet the lender’s requirements for qualification, including demonstrating sufficient income and creditworthiness.
• Maintaining the Mortgage in Both Names: It’s also possible to maintain the mortgage in both names, but with a clear understanding of who will be responsible for the payments. This option can be problematic if one spouse fails to make payments, as it can negatively impact both credit scores and potentially lead to foreclosure.

Important Considerations:

• Lender’s Role: Lenders may have specific requirements or restrictions regarding assuming or transferring mortgages during a divorce.
• Divorce Settlement: The divorce settlement should clearly address how the mortgage will be handled and who will be responsible for payments.
• Legal Advice: Consulting with a family law attorney and a financial advisor is crucial to navigate the complexities of divorce and its impact on the mortgage.

At James E. Crawford, Jr. & Associates, we understand that divorce can be a difficult and overwhelming experience. That’s why we’re here to help you protect your financial interests and provide you with the guidance you need to make informed decisions about your mortgage during a divorce. Contact us today at (888) JCLaw-10 for a free initial consultation. You can also text us at (443) 829-1446 or email us to get started.