When a married couple gets a home loan, they usually apply together, meaning both of their names are on the mortgage loan. If that couple ever decides to get a divorce, then the question of who gets to keep the home afterwards can become extremely complicated. As a result of the likely complications, the couple may even face foreclosure during divorce.
There are options available if one spouse wants the home, or if both spouses want to offload the home and split the equity, but it is important that a decision be made early on in proceedings to prevent potential foreclosure.
If You Want to Keep the Home After Divorce
If you decide you want to keep the home, then there are a few ways that you may be able to make that happen.
To keep the home, you can assume full responsibility for the loan. You may be able to bypass the “due on sale” clause present in many mortgage loans if the property is being transferred as part of a divorce decree. Even so, the process can be complicated since it requires you to maneuver around a few different laws.
You may also be able to refinance the home so that your name is the only name on the loan. If you choose this option, certain requirements must be met, including:
- Mortgage payments must be up to date
- You must have sufficient income to make payments
- Your spouse must agree to give up their equity in the home
Finally, if you do not have sufficient income or credit to refinance the loan, you may be able to modify it. A loan modification may allow you to get lower interest rates and payments.
If Neither Spouse Wants the Home
If neither you nor your spouse is interested in keeping the home, there are a few solutions for offloading the home and avoiding foreclosure.
First, selling the home should be the most straightforward option. However, properly selling a home can take time, and you or your spouse may need the income fast. Also, selling the home may be much more difficult if the loan is underwater.
You and your soon-to-be-ex could also try negotiation with the creditor. They may agree to accept a short sale of the home, meaning you would sell the home for less than the amount remaining on the loan, and the creditor would take the proceeds.
If a short sale isn’t on the cards, the lender may accept a deed in lieu of foreclosure. This means that the creditor will just take the deed without actually foreclosing on the home.
Lastly, if both spouses agree, the home could be rented out and the income shared. This is often an awkward situation since the couple will technically both own the home and have to remain in contact to share income.
The divorce attorneys at Julian, Crowder, & Shuster have years of experience helping divorcing couples reach amicable agreements during divorce.