Unfortunately, sometimes marriages don’t work out. The current divorce rate nationwide is around 42%, down from the outdated statistic that “50% of marriages don’t work out,” but still prevalent in modern life.
Couples often merge their lives and assets during a marriage. If a couple purchased a home during their marriage, dividing that asset can become one of the biggest challenges during an already sensitive and emotional time.
So, how do you handle your mortgage if a divorce occurs? What steps should you take? And how do you remove your ex from the mortgage?
With SWBC Mortgage, we help you navigate life's changes and challenges, both big and small.
What to do When the Divorce Goes Through?
First, don’t panic. Divorce is a major life change, and it’s normal to feel overwhelmed. When it comes to your mortgage, the key is to approach the situation with clarity and a plan. Here are a few steps to consider:
- Review Your Mortgage Agreement
Start by understanding who is listed on the mortgage and the title. If both spouses are on the loan, both are legally responsible for the payments—even after separation—until the loan is refinanced or paid off.
- Decide Who Will Keep the Home
This decision is often part of the divorce settlement. If one party wants to keep the home, they’ll typically need to refinance the mortgage in their name alone. This removes the other party from financial responsibility and the loan itself.
- Consider Selling the Home
If neither party can afford the home on their own, or if both agree to start fresh, selling the property may be the best option. The proceeds can be split according to the divorce agreement.
How to Remove an Ex-Spouse From the Mortgage
Removing someone from a mortgage isn’t as simple as taking their name off a document. Because a mortgage is a legal contract, lenders require a formal process:
- Refinancing the Loan
The most common way to remove an ex-spouse from a mortgage is to refinance the loan under one person’s name. This means the remaining borrower must qualify for the loan based on their income, credit, and debt-to-income ratio.
- Using a Quitclaim Deed
While this doesn’t affect the mortgage itself, a quitclaim deed can be used to transfer ownership of the property. This is often done in tandem with refinancing to ensure both the loan and the title reflect the new arrangement.
- Consulting with a Mortgage Professional
Every situation is unique. A mortgage professional can help assess your options and guide you through the process, whether that’s refinancing, selling, or exploring other solutions.
Financial Considerations After Divorce
Once the dust settles, it’s important to reassess your financial situation. Divorce can shift your income, expenses, and credit profile—each of which plays a role in your mortgage eligibility and long-term financial health.
Here are a few things to keep in mind:
- Credit Score Impact
Joint debts, missed payments during the divorce process, or changes in income can affect your credit score. Monitoring your credit and addressing any discrepancies early can help you stay mortgage-ready.
- Budgeting for One
Transitioning from a dual-income household to a single-income one may require adjusting your budget. Consider all housing-related costs—mortgage payments, property taxes, insurance, and maintenance—before deciding to keep or buy a home.
- Future Homeownership Goals
If you’re selling your current home, you might be thinking about buying again. Take time to evaluate your financial readiness and explore mortgage options that fit your new circumstances.
Navigating the Process with Support
At SWBC Mortgage, we understand that life changes, such as divorce, can be difficult. Our team is here to help you explore your options and move forward with confidence. Whether you’re refinancing, selling, or just trying to understand your next steps, we’re ready to walk alongside you.
Check out our Dreams to Doorstep ebook to learn more!
SWBC does not provide legal or financial advice. You should seek advice based upon your own circumstances from a licensed divorce attorney and/or financial planner.