What Should You Do About a Joint Mortgage During a Divorce?

Published on Feb 16, 2015 11:20 am

Separating assets and divvying up debt are part of securing a divorce. While it may be difficult to keep your credit health in mind while going through such an emotionally turbulent time, it’s important to remember that divorce doesn’t dissolve joint debt, such as a mortgage.

Even after your divorce is final, you will still be responsible for a joint mortgage and the debt will appear on your credit report. Your divorce decree will likely indicate which spouse gets to keep the house, but that doesn’t automatically free the other party from the joint mortgage. Your divorce decree doesn’t change contracts with creditors. You’ll both have to agree on a course of action to remove one spouse from the mortgage contract. Common options include:

  • Selling the house. In this case, the proceeds from the sale are used to settle the mortgage debt, and you would have to agree how to handle any profit that might result from the sale. It might be a good idea to consult a tax advisor on how selling the home might affect your tax obligations.
  • Refinancing the mortgage. Another option is for the spouse who will retain ownership of the house to refinance the joint mortgage in his or her name only. This removes the other spouse from the mortgage contract. However, depending on the state of your individual credit, it may be difficult for one spouse to qualify for a mortgage without the credit status and income of the other spouse.
  • Assuming the mortgage. Not all mortgages are assumable, but if yours is, you might be able to negotiate with the lender for the spouse retaining ownership to take over the mortgage on his or her own while keeping the existing terms of agreement and balance on the mortgage.

Whatever you both decide to do, you’ll have to work together to take care of your mortgage obligations, as they can affect credit reports and scores for both of you. Keep communication open and honest with your mortgage company, and do notify them of the divorce decree.

Joint accounts and debts will appear on both individual’s credit reports, even after the marriage is dissolved. When a joint account continues after a marriage ends, one party may find his or her credit affected by the credit behaviors of the ex-spouse. It’s important to address all joint credit accounts and debts when two people divorce, including a mortgage.

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