Divorce and Your Mortgage: What You Need to Know
Couples don’t enter into a marriage expecting it to soon end. Quite the opposite in fact, when they get married they do so “until death do us part” and are so much in love they couldn’t imagine being separated much less getting a divorce. Unfortunately, divorce is a real thing and too often marriages end. At the same time, over the years they can accumulate a lot of stuff. Maybe they bought two cars together and opened up a couple of credit card accounts. They may have even co-signed on someone else’s loan. But when a divorce comes into play, what happens to all that “stuff?”
Divorce and Your Mortgage
In the divorce decree, it will spell out what gets what and who is responsible for what. For example, if there are two cars and two car loans, the decree will say who gets the blue car and who gets the red car. In some instances, one person could be responsible for both car payments, even if they both have their own car to drive. It’s whatever is in the divorce decree that matters. Sometimes, when a couple can’t agree on how to split up the assets they’ve jointly acquired, the judge will get involved and make the final determination.
But what about the situation of a couple buying a home together and both are on the same loan? Many times one person stays in the house and the other moves out. If they can’t decide who will stay, then selling the property might be the only course of action. But if one person does want to keep the house, the next thing on the agenda will be who is responsible for the mortgage payments. The person who will be occupying the property isn’t always the person who is responsible for the mortgage payment. Again, this responsibility will be listed in the divorce decree.
A Common Scenario
Yet if both of their incomes were needed to qualify for the mortgage, the person remaining in the home may not have enough monthly income to pay for the mortgage, which typically results in the sale of the property. Other times, the person leaving the property might also be responsible for paying part or all of the outstanding mortgage, even if the person won’t be living there.
Another common situation occurs when the person vacating the property wants to buy another home and get a new mortgage. The problem here is the old mortgage payment will still show up on a new credit report. Even if the couple agrees the departing spouse isn’t responsible for the mortgage, the mortgage lender hasn’t made such an agreement.
While the divorce situation is certainly unpleasant the mortgage company doesn’t forgive someone’s original obligation just because a couple splits up. This can be rectified by showing the occupying person has been making the mortgage payment for the past 12 months on time each month. With this verification, while it won’t remove the payment from someone’s credit report, the new lender can still agree to ignore the mortgage when qualifying.