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Exploring your mortgage options during divorce

On Behalf of | Nov 26, 2023 | Family Law

If you and your spouse are thinking of divorce in Minnesota, you need to figure out what you will do with the assets you have acquired. One of the main joint assets you have probably procured during your marriage is the family home. With the home, there is often a mortgage, and with a divorce looming, you might be wondering what your options are.

Three main options

There are three main options divorcing couples have when it comes to their mortgage. These three options include:

  • Selling the home before the divorce, paying off the mortgage and splitting the gains
  • Having one spouse keep the home in exchange for other assets of similar value to the portion of the equity that spouse will receive
  • Keeping the home together as an investment property, whether to rent it out or for some other purpose

What if one spouse wants to keep the home?

In that case, the spouse that is aiming to keep the home after the divorce must assume the mortgage. While it might sound like the divorce decree can address this, the process is somewhat more complicated. In order for one spouse to assume the mortgage, the other spouse must file a quitclaim deed so their name can be removed from the mortgage and the home can be retitled. Then, the spouse keeping the home must either refinance the mortgage or assume the mortgage, if that is a choice that is available to them. Assuming the mortgage means you legally have your spouse’s name removed from the loan and you become the sole person responsible for payments.

Refinancing the mortgage will involve requalifying for the loan based on income and financial responsibilities. If you are considering refinancing your mortgage, you should first do an honest evaluation of your budget postdivorce, including housing costs that might be overlooked, such as maintenance costs. Additionally, you should not forget to include the property taxes that you will need to pay.

It might seem very important to keep the home when you are in the middle of the storm of emotions the divorce process can bring. However, you need to carefully consider all your options as well as your financial reality before making a decision.