Divorce and separation are often emotional stages in life that can be overwhelming and come with lots of changes. For couples that own a mortgage, one of the key challenges is deciding what happens to the property after separation. Divorce and separation in regards to mortgages can be complicated, which is why it’s essential to understand your options and know how the mortgage process works. In this post, we’ll take a closer look at the impact of divorce and separation on mortgages, the available options, and what to consider when deciding what to do with your property.
Option #1 – Selling the Property
Selling the property and splitting the profits is one of the most straightforward options following a divorce or separation. If the property has equity, you can have it professionally assessed, put it on the market and sell it. After the sale, you can split the proceeds equally or in a way that the courts deem fair. Selling the property also means that you will no longer share the responsibility of mortgage payments, so you can pay off any outstanding debts.
Option #2 – Buying Out Your Partner
If you have decided to keep the property, you have the option of buying out your partner’s share. This involves getting your property assessed and valued, and then calculating your partner’s share. If you choose to buy your partner out, you will need to refinance the property to remove your partner’s name from the mortgage. Keep in mind that you will need to meet your lender’s refinancing criteria and have enough equity to buy out your partner.
Option #3 – Transfer of Equity
In some cases, the spouse who wishes to keep the property can ask the mortgage lender to transfer the mortgage to the person’s name only. This is known as transfer of equity. However, this option is only available when you meet certain criteria, including a solid credit score, income, and enough equity in the property. Transferring the mortgage also means that you will be solely responsible for all mortgage payments.
What to Consider When Deciding What to Do with Your Property
When deciding what to do with your property after a divorce or separation, it’s crucial to consider the financial and legal implications. Here are a few things to consider:
Legal Fees: You may need to hire a lawyer or a mediator to help settle the property and mortgage issues. Legal fees can be high, so make sure you budget for them.
Tax Implications: If you decide to sell the property or transfer the mortgage, you may incur capital gains taxes. Consider speaking to a tax professional to understand the tax implications of your decision.
Divorce or separation can be a challenging time in your life, but with proper planning and understanding, issues related to your mortgage can be resolved efficiently and effectively. Whether you choose to sell the property, buy out your partner or transfer the mortgage, it’s important to evaluate all options and their implications before making a decision. Whichever route you choose, ensure you’re working with the right professionals, including lawyers, your mortgage professors, and tax professionals. Together they can help you navigate the complex maze of a mortgage during a divorce or separation. To chat more – please visit www.tcmortgageadvisors.com or https://tcmortgageadvisors.com/divorce-and-separation/ for a quick overview video.