Homeowners decide sell their houses for myriad reasons. Sometimes their families grow and they upgrade to a larger home. Maybe they downsize to a more manageable property. Still other couples may wish to unload their house and travel the world. Another reason-one that homeowners rarely anticipate-is a divorce.
For homeowners who are divorcing, deciding what to do with the marital home will be a major decision. Divorce can be financially ruinous, and how a couple handles its mortgage can make or break their finances. In this post, we'll go over the options for handling a mortgage during a divorce.
Splitting the profit
The simplest way to deal with a mortgage is to sell the marital home and split the profits. Granted, this may be easier said than done. Many couples have strong memories of their shared home, and selling it can be emotionally difficult. Despite the attachment that many couples feel for the house, selling it is often the most practical financial decision.
Buying out the other spouse
If a couple cannot decide whether to sell the house or keep it, one spouse may wish to buy out the other's share. If this is what you and your spouse decide to do, be cautious: If your name is still on the mortgage, you could be responsible for any missed payments. If your ex wants to keep the house, make sure that the home is refinanced under his or her name.
Signing a quitclaim deed
Signing a quitclaim deed means that the signatory forfeits their claim to a property. If you sign a quitclaim deed, your spouse will hold one hundred percent of the rights to the home. Your name, however, will still remain on the mortgage. In the event that your spouse misses a mortgage payment, you may still be responsible for paying it. Additionally, if your spouse decides to sell or refinance the house, you will not be entitled to any of the profits.
Holding a short sale
If you and your partner owe more on your mortgage than your house is worth, you likely can't afford to sell it. One option to consider is holding a short sale. In a short sale, your lender agrees to cancel your outstanding mortgage payments and purchases your home for less than it is worth. It will then auction the house to the highest bidder in an attempt to recoup its losses.
Renting to a tenant
One way to keep the home in your possession while making some cash is to find a tenant. Renting out your home is a viable option if you and your spouse have not yet decided whether to sell the house, both of you want to keep it or you cannot afford to sell it right away. Just make sure that you anticipate the possible emotional ramifications of sharing your marital home with your soon-to-be ex-partner.