In a perfect world, puppies would stay cute forever, the temperature would always be perfect, and marriages would never end in divorce. Unfortunately, we don’t live in a perfect world, and cute puppies grow up to be giant babies, the temperature breaks new records every summer, and people get divorced.
After the question about custody, alimony, and child support is handled – none of which are fun for anyone – you have one other big decision to make. What should you do with your home?
Sell, Sell, Sell
Assuming you’re not underwater on your mortgage and your home is in good shape, the quickest and easiest answer is often to sell your home and split any proceeds. The amount you get may be enough to help you find a new home or pay for your legal fees. Depending on your custody arrangement and your finances, you may want to consider a smaller home that works with your new (and smaller) household budget.
Buying the Other Out
This may have been your dream home, one you built from the ground up or spent months looking for. The idea of selling is unbearable. If you simply cannot bear to part of your home, your other option is to buy out your ex. The easiest way would be to refinance the loan into your name and pay your ex an agreed upon amount. Refinancing is also a good way to possibly lower your interest rate and walk away with a slightly lower mortgage.
Determining how much you should pay to keep the house is the tricky part. You’ll want to work with your attorney, an appraiser, and if you’re refinancing, your lender to determine the value of the home and what you should offer as a buy out amount.
Another, although very rare, option may be to assume the loan – instead of going through with a refinance. Loan assumptions are extremely rare, but it’s always worth asking your mortgage company if it’s an available option.
Taking Over the Mortgage without a Buyout
Maybe a refinance or loan assumption isn’t an option. If one of you stays in the home and agrees to pay the mortgage, promising a later buyout, you may be able to make it work. A word to the wise, though. As long as both names are still on the mortgage, both of you are liable for the debt. If payments are missed, it’s going to affect both your credit reports.
If you allow your spouse to stay in the house without removing your name from the mortgage, make sure the divorce settlement and decree clearly spell out the arrangement including your former spouse’s agreement to pay the mortgage. This will come in handy if you decide to buy a home later and apply for a mortgage. The mortgage from your former house will still be on your credit, and you’ll need to be able to show them the arrangement.
No one wants to imagine that any marriage will end in divorce, but it’s an unfortunate part of life. If you find yourself in the middle of a divorce, make sure you know what your options are. Whatever you do, talk to your divorce attorney and your lender to make sure you have all the information to make the best decision.
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