Who Is Responsible for Paying a Mortgage When a Couple Gets Divorced?

Buying a new house with your spouse is exciting and offers lots of possibilities for the future. Unfortunately, sometimes things don’t work out, and couples decide to get divorced. If this ends up happening, the house – and accompanying mortgage – need to be handled the right way. Being informed about the requirements and what is and isn’t allowed is key to protecting your financial stability if you get divorced.

What Are the Options for the House?

In a divorce, there are two ways most couples deal with the house. One spouse can keep it, or they sell it. Considerations such as whether one spouse can afford to keep the home and how much equity has been accumulated weigh into this decision.

  • Selling it. The divorce agreement may require the home be sold and the former spouses split the equity.
  • One spouse keeps it. One spouse can afford the home and “buys” the other spouse out, meaning the spouse who is leaving gets their share of the equity.

Who Is Responsible for the Mortgage?

Both parties are responsible for the mortgage. Many couples assume if the divorce decree says one party is responsible for paying the mortgage, they are protected. They are wrong. Divorce decrees don’t supersede other binding contracts. This means if the spouse who keeps the house doesn’t pay the mortgage, it comes back on the other former spouse who is still on the note.

This is why you must refinance!

If one party is keeping the home, he or she needs to refinance, so it’s in their name only and the other party is off the loan. If there’s equity in the home, a cash-out refi allows the departing party to take their share of the equity.

How Long Is the Process?

The time it takes to iron out a house issue during a divorce varies. If the house is being sold, it can take months to find a buyer and go through the closing process. Refinancing is a bit quicker, but may still take several weeks. In both scenarios, the former couple is required to keep paying their current mortgage payments on time.

How Does It Affect Your Credit?

Hopefully, the couple starts off with high credit scores, and they keep them that way. If one party is supposed to be paying the mortgage and isn’t, it will affect both owners’ credit scores negatively. However, if the payments are made on time until the home is sold or refinanced, neither person’s credit score should see much of an ill effect.

Going through a divorce is difficult and emotional, which makes it hard to deal with the family home. For the sake of your financial stability and future, work closely with your spouse and your attorney on making the decision that benefits you the most. Close all your joint accounts, change your passwords to something your former spouse can’t guess, and check your credit regularly, just to hedge your bets.

Share