6 Options When You Can’t Afford a Mortgage Due to Divorce

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August 14th, 2018 Comments Off on 6 Options When You Can’t Afford a Mortgage Due to Divorce

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.

Breaking Up Minnesota Family Can't Afford a Mortgage Due to Divorce

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.

 

Why Owning a Home and Getting Divorced Is Complicated

Owning a home and going through a divorce only complicates an already messy situation.

Can't Afford a Mortgage Due to Divorce in Minnesota - Decree

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:

 

1. Negotiate with the Bank

There are some bank-related options available to you if you’re going through a divorce and find you can’t afford your mortgage:

  • Talk to Your Bank.  If your bank knows you are on the verge of losing your home, sometimes they’ll negotiate better rates and lower monthly payments to help.  After all, if you lose the house, they are on the hook for the loss, too. Banks don’t want to give in to everyone that needs help, but they don’t want to lose more money than they need to either.  Therefore, your bank may be able to offer options to make your mortgage more affordable for you.
  • Apply for an FHA Loan as a Second Mortgage.  If you know you can’t afford the mortgage on your home now, but want to in the future, you may be able to get an FHA loan as a second mortgage to help.  You could negotiate a 3-12 month respite from the bank in order to get back on track and keep your home.
  • Deed in Lieu of Foreclosure.  If you know keeping your home is unreasonable, try asking the bank to do a deed in lieu of foreclosure.  You give them the deed to your house to sell for whatever they feel it’s worth to satisfy the loan that is in default, and you walk away without having to undergo foreclosure proceedings.  This one will hurt your credit but is a quick solution when you need to free up extra cash fast and move on from a divorce.
  • File for Bankruptcy.  This is never something you want to> consider, but it can be a good idea if you’re stuck.  Bankruptcy not only frees you from any financial obligations related to your house but other debts as well.  Plus, as the process moves forward, you can live in your home mortgage-free until a foreclosure takes place. Of course, this will harm your credit for a long time, but sometimes there’s no other choice.

 

Short Sell the Home

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.

 

2. Have Your Ex Take over the Payments

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.

 

Beware of the Quitclaim Deed

Can't Afford a Mortgage Due to Divorce Quitclaim Deed in Minnesota

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.

 

Consider a Loan Assumption

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.

 

3. Rent Your Home Out

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:

  • Marketing of the vacant property
  • Tenant screening, placement, and lease drafting
  • Rent collection
  • Maintenance and repair issues
  • Routine property inspections
  • Legal proceedings
  • And much more

 

4. Co-own the Home

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:

  • Know that you and your ex can live together in the home until a buyout occurs
  • Be ok with not living in a house you co-own (if you and your spouse can’t live together)
  • Have a set payment plan in place to push the buyout process forward and prevent it from stalling
  • Know that any missed payments will fall on you, even if you aren’t living in the property
  • Understand that your credit history will show the entire mortgage amount until the buyout is finalized, which can hurt you when it comes to renting or buying on your own
  • Understand your legal rights and obligations, as co-ownership is a way to legally own a house with someone else as business partners, rather than as a married couple

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.

 

5. Sell Your Minnesota Home on the Market

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:

  • Your house is more expensive than you thought, especially after calculating things like the mortgage payment, insurance, property taxes, alimony or child support you owe, utilities, and other living expenses
  • You don’t qualify to refinance the house because the divorce damaged your credit or you lack enough credit history because you’ve been relying on your spouse’s credit up until now
  • Neither you nor your soon-to-be ex can agree on who gets the house
  • You owe much more on your home than the home is worth and can’t cover (or don’t want to cover) the monthly payments
  • Both names are on the mortgage, but your spouse has stopped paying their half and you can’t keep up with the full payments

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

 

6. Sell Your Minnesota Home As Is

Sometimes selling your house in the traditional way ‒ using a realtor and the existing market ‒ presents  hardships such as:

  • Having to hire an experienced real estate professional to market and sell your home fast
  • Needing to perform costly home improvements, renovations, and repairs
  • Getting behind on the mortgage during divorce proceedings
  • Trying to figure out a way to sell a home you owe more on than it’s worth

Can't Afford Minnesota Mortgage Due to a Divorce Refinance Sheet

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:

  • Receive an accurate home evaluation so you know what your house is worth if sold as is
  • Don’t fret over things like realtors, showings, banks, commissions, or fees
  • Never worry the home won’t sell ‒ we’ll buy your house as is for a competitive price, no questions asked
  • Don’t worry about having to short sell your home, which can harm your credit and net you far less than the home is worth
  • Hand your home over without having to make repairs, remodel, or even clean
  • Know that your family and divorce situation are at the forefront of the transaction

 

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.

 

Final Thoughts

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.

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