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Mortgage options during a divorce

On Behalf of | Nov 27, 2023 | Family Law |

Unless you have constructed a prenuptial agreement or trust, property acquired during a marriage is part of the marital estate. The mortgage on your New Jersey home is part of the property you must consider dividing.

What happens after a divorce when you have a mortgage?

For most couples, a house is usually the most significant asset requiring consideration during a divorce. Some options that family law courts offer couples during a divorce include selling the house and dividing the profits, using the house as an investment property with shared profits, or one spouse relinquishing the property to the other.

If one spouse opts for sole ownership of the marital home, this individual must consider if they can afford the expenses associated with this decision. Property taxes and maintenance are extra costs to consider besides the mortgage.

How do you remove one partner from the mortgage?

There are two ways of removing one spouse from the mortgage. One option is to have the spouse remaining in the home assume the mortgage. Refinancing is the other option.

Mortgage assumptions are rarely permitted today. Refinancing can be beneficial if interest rates have decreased since closing on the home.

Refinancing is not always part of a divorce agreement. However, if refinancing comes into play, the spouse who keeps the home must qualify for a new loan.

How do you divide the equity?

Home equity is the difference between the market value and the amount owed on the mortgage. The divorce decree details the equity division between the spouses.

Cash-out refinances are a typical solution when one spouse buys out the other. These loans provide bigger payments where you receive the cash difference.

Going through a divorce is never easy. However, considering your options and doing the necessary research will help you make the right choice.