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3 options for dealing with a mortgage in a divorce

On Behalf of | Oct 29, 2021 | Divorce

Going through a divorce in New Jersey is always tough. Child custody negotiations and property division are never cut and dry. One of the hardest things to deal with in a divorce is a mortgage for a shared home. If you and your soon-to-be ex-spouse are still making payments on a mortgage, you have a few different options:

Option #1: Decide who gets to stay in the house

The house may be comfortable for your kids and close to their school. It can make a lot of sense for one spouse to remain in the house after the divorce is final while the other spouse finds new accommodations. However, there are a lot of different ways this can go.

If you want to remove one spouse’s name from the mortgage, the lender typically requires you to refinance. The spouse that stays in the home after refinancing may also need to pay off the spouse who is leaving. Refinancing isn’t always possible, though, due to credit and income issues. Some divorcing spouses have to work out a deal to keep the mortgage as is even though one spouse is leaving.

Option #2: Sell the house

Financially speaking, selling the house and dividing the profits is the simplest option on paper. If both spouses agree to it and there is equity in the home, selling can be a great option. However, dividing the profits will be more complicated if the mortgage was assumed by one spouse prior to the marriage. It also might not be a good solution if there is no equity in the home yet.

Option #3: Stay in the home together

This option sounds crazy to a lot of people. However, if a divorcing couple has a large enough home and an amicable relationship, they can sometimes make it work. In a lot of cases, this is a temporary solution until both spouses are able to become financially independent from each other.

Remember New Jersey is an equitable distribution state

Since New Jersey is an equitable distribution state, marital property won’t necessarily be split in half. It’s important to remember this when deciding how to handle a mortgage.