Managing a Mortgage After Divorce

Mar 13, 2023

Divorce can complicate things — especially for couples who own a home together. Even if both spouses agree on what to do with the house, there’s still the issue of what to do about the shared mortgage loan.

Every relationship is different, including when they decide to go their separate ways. So while there’s no hard-and-fast answer to these questions, this list can give you an idea of what typically happens to mortgages during a divorce. 

Let’s explore some of the options available to couples looking to navigate this process.  

1) Sell the Home and Pay Off the Mortgage

This can be a good option when neither person wants to keep the home (oftentimes, downsizing is ideal for both individuals). Selling can allow divorced couples to pay off their mortgage and divide any remaining proceeds.

If you’re considering this option, it’s important to carefully consider the current market conditions and not rush into a sale so you can get the best possible deal on your home.

2) Refinance Your Mortgage

After a divorce settlement, refinancing allows you to pay off a mortgage and replace it with a new loan that is only in one person’s name. This is a common choice when one individual intends to keep the home. 

There are closing costs associated with refinancing to be aware of. It may also change the interest rate and monthly payment for whoever keeps the mortgage.

3) Keep Things As-Is

It’s also possible to keep your current mortgage, and there are instances where this is the best-case scenario for both parties. But you’ll want to get the arrangement in writing if so. It’s important to be clear about each person’s responsibilities and make a plan for how payments will continue to be split even as circumstances change over time. 

Both individuals can have their credit impacted by late payments or defaulting on their mortgage, so long-term cooperation is key for those who opt to keep their loan as-is.

Have any questions about mortgages or refinancing? Let’s chat soon.