Divorce Can Lead to Issues for Homeowners
When a couple going through a divorce owns a home, there are many issues that will need to be addressed when considering the division of marital property.
April 06, 2013
During the process of divorce, many families need to decide what to do with the marital home. If the house can be sold, the mortgage paid off, and any remaining proceeds divided between the parties, not necessarily equally, that may be the best solution.Frequently, one member of the couple wishes to stay in the house and continue to pay the mortgage after the divorce. The problem is that if both members of the couple have signed the note and mortgage, they are both liable. The spouse who does not stay in the house will have an exceedingly difficult time obtaining a new mortgage for a new house. Therefore, a good solution is that the spouse who is in the house will refinance it to pay off the existing mortgage and get a new loan in his or her own name.
Currently, in April of 2013, mortgage rates are very low and frequently the mortgage rate of interest on the existing mortgage is higher. Therefore, a refinance will also lower the monthly payment.
Sometimes, the house is worth less than the amount of the mortgage against it. In this case, it is impossible to refinance the house. Usually one spouse wishes to leave the house and suggest bankruptcy. However, the other spouse wishes to keep the house.
In this situation, consulting with a divorce lawyer and a bankruptcy lawyer is a very good idea. Perhaps a bankruptcy could be filed and then the loan renegotiated with the lender and put in the name of the spouse who wishes to stay in the house. If not, then financially it makes little sense for a person to stay in a house and make payments at a high interest rate on a loan that is greater than the value of the house.
Several years ago, the easy solution to a divorce case was to sell the house, pay the bills, and split what is left. With houses now frequently worth less than the mortgage balance against them that solution no longer works. Consultations with a knowledgeable divorce lawyer and a bankruptcy lawyer can frequently come up with a good solution for the couple.
Article provided by Schlesinger & Strauss
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