Married couples frequently take out a joint mortgage on their shared family home. Unfortunately, if the marriage does not work out, things can get exceedingly tough and often results in one side being exposed to unfair treatment. What to do with the marital house is one of the most critical decisions separating spouses must make. Trying to come to an agreement on a property and a mortgage might be a nightmare if the split was contentious.
Make sure you have the right people around you before making decisions regarding your house or mortgage during a divorce, including qualified divorce attorneys and best property division lawyers.
Possible Options You Can Consider When It Comes To Mortgage:
When a marriage ends, it’s not always easy to figure out what to do with a combined mortgage. However, you should consider the long-term financial consequences of becoming fully liable for a mortgage before choosing one of the following choices. Make the right decision that is best for you now and in the future.
Refinance your mortgaged property:
Following their divorce, several couples want to refinance their shared mortgage into one name. This relieves the spouse whose name is being removed off the mortgage of financial accountability.
The spouse who will maintain the house (and/or be liable for mortgage payments) may be able to refinance it into their own name in some instances. This may be the best option: the new loan will be solely repaid by the individual committed to paying the debt.
Only the applicant’s own income and credit score can be used to qualify for the refinancing. However, if a spouse will get alimony or spousal support, they can utilize that income to be eligible for refinancing as long as the divorce settlement specifies that they will receive alimony for at least three years.
Sell your home:
If neither of you can refinance or afford the payments on your own, a divorce agreement may compel the sale of the house and the division of proceeds. They may have no choice but to sell if neither partner can afford the mortgage on their own. It could be in everyone’s best interests to sell the house, pay off the mortgage, take their cut of the earnings, and start again.
Tax implications:
You may be subject to capital gains taxes if you sell the residence as part of your divorce settlement or buy out your spouse’s stake. When a profit on the sale of capital assets, such as a house, reaches a specific level, a tax is applied.
According to the IRS, if you and your spouse sell your home, you can both deduct up to $250,000 in gain from your taxable income. This, however, only applies if you’ve resided in your primary house for at least two of the five years before leading up to the sale. Vacation houses and investment properties are not eligible.
Estimate your home value:
Although the only way to fully assess and calculate equity is to sell the house, this isn’t always practical or appropriate. So the next best thing is to have a professional evaluation.
However, there are times when a couple cannot agree on the assessed worth. This can hinder your progress and require you to spend more time and money on lawyers and evaluators.
After deducting the selling costs, you maintain the equity in your property when you sell it. It’s common for a couple to divide the equity in their home as part of their divorce settlement or to use it to pay off other debts they’ve amassed together.
