As much as we don’t like to talk about it, there are probably many couples out there thinking about getting a divorce, especially after being in lockdown for several months. This truly is a testing and challenging time but whether or not you’ve been thinking about it for years or starting to plan, splitting up a home, selling assets, and dividing the mortgage can be tricky and confusing.
When dealing with mortgages during a divorce or separation, it’s important to do as much research as possible so you are well aware of your rights, implications and consequences to owning a home together, and what you can do with your assets. Are you planning on living separately or getting a full-blown divorce? If there is any chance for reconciliation, it’s probably best not to make any permanent moves just yet when it comes to finances.
Legal Separation
A legal separation is a couple who independently decide to take up different residences but that doesn’t mean they’ve let someone off the mortgage payment hook. If it took two incomes to qualify for an existing mortgage, the lender will require both parties to pay. If they both signed the note to repay the mortgage they are both obligated to pay it back every month.
Many agreements have one party staying in the house while the other moves out and finds another place to live. It can be agreed upon that one party is responsible for the mortgage payment but that needs to be an agreed-upon arrangement, however, it is not legal in court. If someone does not file for legal separation and simply moves out, both parties are still on the hook. Two parties can decide on their own who is responsible for payment and the lender is not involved but if there is a legal separation, court documents could spell out who’s responsible for what.
The lender only cares that the mortgage is paid, regardless of who actually pays it. The obligation will typically still remain on both party’s credit reports even if the legal separation spells out who pays for what.
Divorce
A divorce is similar. It is also a legal arrangement that decides who gets what and who is responsible for payments of mortgages and other debt accrued. If one party assumes the mortgage the lender can remove the monthly debt from the other party if agreed upon by the court systems. To completely remove a spouse from the transaction, the occupying spouse needs to refinance the existing mortgage into their name and also quit claim ownership from one party to the next. The mortgage and title will need to be taken into consideration with this process.
There are a lot of parties involved in many lenders want to see the monthly payments be made in a timely manner over a specific period in order to take on the monthly payment permanently. If it is demonstrated that the payments can be made, typically over a span of one year, there can be a case made for removing the non-occupying person from future obligations.
Removing someone from a deed is not simply a marital agreement but a legal process that does take time. If you are moving out and need a place to live or planning on refinancing or even selling the property and splitting the profits, give me a call. I’d love to help you walk through some of the tricky and oftentimes overwhelming legal jargon and rules associated with a separation or divorce after owning property and paying a mortgage together.
Contact me anytime for Seattle real estate, Bellevue homes, and Puget Sound Realty Services.
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