Getting divorced is not easy.
And unfortunately, one of the biggest issues facing people on the verge of divorce is what to do with their home. This is likely the biggest asset you and your spouse own together.
Your marriage is ending and the last thing you want is the burden of financial problems during your divorce proceedings. However, that does not mean the mortgage you and your spouse have together will go away any time soon.
If you and your spouse are beginning divorce proceedings and have a mortgage together, there are some important financial decisions you’ll need to make about what to do with the family home.
This is especially true if keeping the property is not an option for you because it’s too expensive.
Luckily, we’re here to share some of the best options available for when you can’t afford your mortgage due to divorce.
Owning a home and going through a divorce only complicates an already messy situation.
Currently, the divorce rate in America hovers around 40-50%.
As a result, many people are faced with making tough housing decisions.
It’s possible the home you bought when you got married might become a valuable asset during your divorce.
However, it is also possible it can be a major liability if you can’t afford the mortgage on your own.
Things like home equity, credit scores, employment statuses, and whether children are involved all play a role in who gets to keep the house. However, the truth is, if the mortgage is too high for either party to afford, something must be done quickly to avoid a financial mess such as a foreclosure.
Here are the best options available to you if you can’t afford your mortgage due to divorce:
There are some bank-related options available to you if you’re going through a divorce and find you can’t afford your mortgage:
If you’re stuck in your divorce proceedings and know that selling your home for a profit is not going to work, you might consider a “short sale.”
When you short sell your home, the mortgage lender agrees to let you sell the home for less than it’s worth. They then cancel any remaining debt you have on it.
As a result, you can be rid of your house and the mortgage, without having to come up with the rest of the loan amount.
The problem is, this will affect your credit for quite some time, and has the potential to cost you a lot when it comes to doing your taxes. This is because the IRS sees debt cancellation (even in the case of a short sale) as added income that is taxable.
If you determine that you can’t afford your mortgage after divorce, it might be worth having your spouse take over the payments.
In order for this to work, your ex must qualify to refinance the home under his or her own name.
If your spouse fails to make the payments, even after the divorce, and your name remains on the mortgage, you are both liable for the mortgage each month.
That means any missed payments fall on you, which obviously defeats the purpose of handing the house over to your ex in the first place.
Not to mention, if you ever want to buy another home under your name in the future, having that existing mortgage hurts your chances of qualifying for another loan.
It may even hurt your credit enough to prevent you from renting a place, which puts you in a bind.
No matter how trustworthy your ex-spouse is if you decide to hand your home over to them, make sure they refinance it in their name only.
It may sound appealing to sign a quitclaim deed in the midst of a divorce so you can get out of your mortgage quicker.
This is especially true if your spouse wants to take over the home but can’t qualify to refinance it on their own because they don’t have enough income, have a poor credit score, or there’s not enough equity built up in the home.
But there are some things to be aware of before you sign such a serious document.
Quitclaim deeds are written documents designed to transfer ownership of a property to another person. So, in the case of your divorce and your home, you would be signing over ownership of the house to your ex.
More importantly, just because you sign a quitclaim deed, doesn’t mean you’re off the hook when it comes to missed mortgage payments.
Plus, if you do sign one, you give up any right to sell your home or make any profit from it in the future.
In the end, a quitclaim deed doesn’t remove your name from the mortgage. It only helps your ex take over the home on their own, leaving you with some responsibility.
Not to mention, it leaves them the option to refinance in the future if they qualify or sell the property at any time they want. And they’ll pocket all the profit.
If you really want your name off the mortgage and want to be completely free of the financial obligations, you’ll want to have your spouse legally assume the loan, sell the property, or have the mortgage refinanced in only your spouse’s name.
Though rare these days, it is possible to have your spouse assume the current loan on your home if they don’t qualify (or don’t want to pay) for a refinance.
Sometimes your mortgage lender will let one spouse assume the entirety of the loan, freeing you from any legal or financial obligations.
Your ex would still have to prove they are able to make the monthly mortgage payments and show a history of good credit. But it can be done.
Keep in mind, however, the interest rate on an assumed loan is typically high and your ex may not be okay with that.
Renting your home allows you to handle the more emotional side of getting divorced, get your other financial affairs in order, and let your home build up equity, should you decide to sell for a profit in the future.
That said, renting a property comes with a lot of added responsibility that you and your ex will have to agree to handle together:
This may seem like a crazy solution to your divorce headaches, but sometimes co-owning the home you bought with your spouse is a good idea, especially if you have children.
It’s also a helpful solution for times when neither you nor your ex can afford the house on your own after the divorce.
That said, co-owning your home with your ex is most likely to happen when one person wants to offer a buyout of the property at some point, but can’t in that moment.
As a result, both parties agree to co-own the property, let equity build up, and deal with the transaction when things are better.
The key to this strategy involves work on both sides. You must:
Keep in mind that co-owning your home will keep both you and your ex on the original lender agreement. And despite what you and your ex have agreed to, if any missed payments occur, the lender will hold both of you responsible for those missed payments.
This is even true if you have a divorce decree stating the terms you and your ex have agreed to when it comes to house payments.
The bank only wants to get paid; they don’t care who is the one that’s supposed to do it or how it happens – they simply just care that the payments are made.
Sometimes selling your Minnesota house is the best option when you realize you can’t afford the mortgage after divorce.
This is especially true if your house has equity in it. If that’s the case, it can be sold for a profit and the profit can be split among you and your ex.
Take a look at these common scenarios and see if any of them sound like you:
If any of these situations apply to you, it’s time to think about getting out of your mortgage as soon as possible by selling fast.
This way, the proceeds from the sale can cover the existing mortgage and each party can split what’s leftover in the divorce decree.
You can then move forward and deal with the emotional effects of your divorce, without having to worry about continuing financial hardships
Sometimes selling your house in the traditional way ‒ using a realtor and the existing market ‒ presents hardships such as:
Because of this, opting to sell your home as is, with the help of a caring and compassionate investor experienced in moving the process along as quickly and painlessly as possible, is often the best decision you can make.
A home buying company like Homestead Road can provide real results when it comes to selling your Minnesota home as is:
If you’re looking for a quick way out of your mortgage, but don’t want to deal with the hassle of selling yourself, contact Homestead Road today to sell your house as is fast.
We’ve helped many people navigate property during divorces and strive to always make the process as easy as possible so you don’t have to worry about a home that is on the verge of foreclosure.
Ending a marriage is a tough thing to do. And unfortunately, dealing with the emotional and financial fallout of a divorce is not only stressful but also can have serious, long-term effects on the rest of your life.
If you and your soon-to-be ex-spouse own a home together, it won’t matter to your mortgage lender why you’re divorcing. It also won’t matter why you can’t afford to keep paying for your house long after the divorce decree goes through.
There are plenty of unique ways to get out of a mortgage you can’t afford due to divorce.
However, for those seeking quick relief, cash upfront to move forward in life and a way to prevent a foreclosure, the best option is to sell your Minnesota home as is.
With a trusted company like Homestead Road ready to give you a fair cash offer on your house as is, you can get rid of your mortgage and pick up the pieces of your life after divorce.
Don’t let a major life change like divorce get in the way of your financial freedom or peace of mind.
Request a no-obligation cash offer on your home from Homestead Road today, and move onto the next stage of your life without the stress of home owning problems to drag you down.