Divorce and your mortgage: Options for separating finances

Handling your mortgage during divorce

Divorce is difficult enough without having to navigate mortgage complications. But the house is often the largest shared asset, and figuring out what to do with it requires careful planning.

We've helped many couples work through these situations. While we're not attorneys (and you should work with one), we can explain your mortgage options clearly.

Your main options

Option 1: One spouse keeps the house The spouse keeping the home refinances into their name only, often with cash out to buy out the other spouse's equity share.

Option 2: Sell the house Both names come off the mortgage, and you split the proceeds according to your divorce agreement.

Option 3: Keep the mortgage as-is (temporarily) Sometimes couples agree to keep the current mortgage while one spouse stays in the home. This has risks (see below).

The buyout refinance

This is the most common scenario when one spouse wants to keep the home. Here's how it works:

1. Determine the home's current value (usually via appraisal)
2. Calculate each spouse's equity share
3. The keeping spouse refinances the home in their name only
4. Cash from the refinance goes to the departing spouse

Example:

• Home value: $500,000
• Mortgage balance: $300,000
• Total equity: $200,000
• Each spouse's share: $100,000

The keeping spouse refinances for $400,000 ($300,000 to pay off old mortgage + $100,000 cash to departing spouse).

Can you qualify alone?

This is the key question. When you originally qualified, both incomes were considered. Now you need to qualify on your own.

Factors that help:

• Strong individual income
• Good credit in your name
• Receiving alimony or child support (can count as income after 6 months of receipt)
• Lower other debts

Factors that can complicate things:

• Most household income came from the departing spouse
• Credit issues
• High debt-to-income ratio on your income alone

We can run the numbers for your specific situation to see what's possible.

Using alimony and child support as income

Lenders can count alimony and child support as qualifying income, but there are requirements:

• You must have documentation (court order or divorce decree)
• Payments must continue for at least 3 years after closing
• You should show a history of receiving payments (6+ months is typical)

If your divorce is finalized and you've been receiving payments consistently, this income can help you qualify.

What about the departing spouse's credit?

Until the mortgage is refinanced or paid off, both spouses remain liable. If the keeping spouse misses payments, both credit scores suffer.

This is why refinancing promptly is important. A quitclaim deed removes the departing spouse from the property title, but does NOT remove them from the mortgage. Only refinancing or selling does that.

If you're paying the mortgage but not on the loan

Sometimes couples arrange for one spouse to pay the mortgage on a home they're not the primary borrower on. This creates problems:

• You're paying for an asset you don't own
• Missed payments hurt the other spouse's credit, not yours
• It's hard to prove payment history if you later need it for a mortgage

If you're in this situation, working toward refinancing into your name makes sense.

If you can't qualify alone

If you can't qualify for the buyout refinance, you have options:

• Co-signer: A family member with strong credit and income can co-sign
• Wait and reapply: Improve your credit or income situation first
• Negotiate different terms: Maybe a smaller buyout with seller financing
• Sell the house: Sometimes the cleanest solution

Timing with your divorce

You don't need to wait until your divorce is finalized to explore options. In fact, knowing what's possible with the mortgage can help inform your settlement negotiations.

We can give you a pre-qualification that outlines:

• Maximum loan amount you'd qualify for
• Estimated buyout cash you could access
• Approximate monthly payment

This information helps you and your attorney plan.

The process

1. Pre-qualification: We review your solo financials and outline your options
2. Coordinate with attorneys: Share the information with your legal team
3. Finalize divorce terms: Include mortgage details in your settlement
4. Refinance: Complete the buyout refinance per your agreement
5. Update title: Quitclaim deed removes departing spouse from title

Timing varies, but the refinance itself typically takes 30-45 days.

Sensitive situation, professional approach

We understand this is a difficult time. Our job is to provide clear information and options, not to add stress. Everything we discuss is confidential, and we'll work with whatever timeline your situation requires.

Schedule a confidential call to discuss your options, or get pre-qualified to see what you might qualify for on your own.