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The truth is a guide to understanding mortgages and marriage agreement settlements does not really exist because each divorce is a little different, and there’s more than one way to deal with a mortgage and home during a divorce. Therefore, in this article, we will discuss a few pertinent things you should keep in mind should you ever have to figure out what happens with the house now that the marriage is over..
When people end up taking out a mortgage, there is a lot they need to consider. This includes the size of the down payment, the term of the loan, and the interest rate. At the same time, there are a few issues that could complicate the way a mortgage is paid off.
Nobody enters into a marriage planning on divorce; however, if this does take place, it is critical to think about how a marriage settlement agreement is going to impact the mortgage. There are a few important things to keep in mind.
When looking at the assets that the couple shares, it is important to think about not only assets but debt as well. One of the largest sources of debt is going to be the mortgage. Obviously, it is impossible to split the house down the middle. Therefore, it is important to think about how the mortgage itself is going to be divided.
When dividing a house following a divorce, the equity should be considered an asset, and the mortgage should be considered debt. Then, when the settlement agreement is finalized, the best practice is to ask a spouse who is retaining ownership of the home to refinance the loan and just his or her name. This will eliminate the liability of the other spouse and remove his or her responsibility for paying off the mortgage. This is the fair and equitable way to divide a house following a divorce.
It is important for everyone to think about how the mortgage is going to impact other assets as well. Some of the other factors that will have to be addressed during a divorce include alimony payments, child support, credit cards, financial accounts, and other types of property. When looking at the grand scheme of things, it is likely that the house is going to be the largest asset. Therefore, it might be helpful for couples to start with the house first and then worry about the smaller issues later. That way, this will streamline the divorce process and ensure that everyone ends up with a fair and equitable divorce settlement.
In the event that your mortgage payment becomes a part of the divorce settlement, it is highly recommended that you protect yourself by having your attorney include strong language in the divorce settlement stating that the mortgage payments from your former spouse are a form of alimony. The settlement should clearly spell out what happens if the mortgage payments are not being made or not made in a timely fashion. By making the mortgage payment a form of alimony, the non-paying former spouse will likely be held in contempt of court. And, in many states, a judge can then throw the former spouse in jail if they do not make their required alimony payments. The goal here is to create a strong incentive for the former spouse to keep making those mortgage payments.
That said, even though carefully drafted settlement language can protect both spouses after the divorce is finalized, it is important to remember that it is not a guarantee. Unfortunately, there are no foolproof ways to protect spouses who are co-debtors on a mortgage after a divorce. Consequently, the best solution is often to refinance or sell. Note, former spouses must also remember that if the other spouse is sued, goes bankrupt, or has a lien filed against them, that will affect the joint property and make a messy situation even more complicated—so when in doubt, refinance or sell.
On the other hand, if selling your home or refinancing your mortgage loan are not viable options, then you need to lobby for specific safeguards in the divorce decree—plain and simple. Typically, having your attorney add the appropriate safeguards to your divorce decree or settlement is the best way to ensure that you are not potentially left holding the bag.
Ultimately, the end of a marriage and dealing with the division of property or debt are not going to be easy. But you do have some options when it comes to your mortgage and home. Nevertheless, a definitive how-to, or a guide to understanding mortgages and marriage agreement settlements may not thoroughly explain your particular set of circumstances. In fact, at best, all you might get is a better idea of what your options are. Thus, it is imperative that you speak with your attorney as well as your lender to figure out what the next steps look like for you and your soon-to-be former spouse.
Do you have questions about home loans? Are you ready to sell a home, or are you thinking about refinancing? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington, serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers and provide expert assistance to homeowners all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages.
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