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  • Cindy Wysocki

Mortgages and Divorce

Updated: May 14

Divorce is undoubtedly one of the most challenging life transitions one can go through. Amidst the emotional turmoil, there are practical considerations that must be addressed, particularly when it comes to shared assets like a family home. Mortgages, often intertwined with homeownership, present a complex web of financial implications during divorce proceedings. Here's a breakdown of what you need to know: 

1. Consult a Mortgage Expert Before Finalizing Your Divorce 

Before signing any divorce agreement, it's crucial to consult with a mortgage expert. Their insights can help you navigate the complexities of mortgage assumptions, budgeting, and the implications of keeping or selling the family home. 

2. Budgeting and Affordability 

Understanding your budget is paramount. What can you comfortably afford post-divorce? Factor in mortgage payments, taxes, insurance, and any potential maintenance costs. A mortgage expert can help you assess your financial situation realistically. 

3. Assessing the Family Home 

If you're considering keeping the family home, a thorough inspection is essential. Identify any impending repairs or maintenance issues and estimate their costs. This information will be invaluable when making decisions about the property's future. 

4. Mortgage Assumptions: Assumptions vs. Reality 

There's a common misconception about mortgage assumptions. While some loans allow for qualified assumptions, most require a simple assumption, where the departing spouse remains on the mortgage. This can have implications for accessing equity and may necessitate careful financial planning. 

5. Impact on Credit and Ownership 

Understanding the distinction between being on the mortgage and being on the title of a property is crucial. Late or missed mortgage payments by the staying spouse can adversely affect the departing spouse's credit. Establishing clear communication and accountability mechanisms can mitigate this risk. 

6. Equitable Asset Division 

In divorce proceedings, assets must be divided fairly. Consider factors such as net value, tax implications, and liquidity when comparing assets. Ensuring an equitable division requires a thorough understanding of each asset's true value. 

7. Mortgage Misconceptions 

Dispelling common mortgage myths is essential. Contrary to popular belief, you don't need a job or a 20% down payment to secure a mortgage post-divorce. Additionally, being "shackled" to a low-interest rate mortgage loan isn't always a good idea, as there are options available to explore. 

8. Support Income Considerations 

Support income, whether received or paid, plays a significant role in mortgage eligibility. Properly documenting support payments in divorce agreements can impact income calculations and tax deductions, offering financial flexibility to both parties. 

In conclusion, navigating mortgages during divorce requires careful planning, clear communication, and expert guidance. By understanding your financial obligations, exploring available options, and prioritizing equitable asset division, you can achieve a smoother transition to post-divorce homeownership. Remember, seeking the advice of a qualified mortgage expert is key to making informed decisions during this challenging time.

 

If you want to learn more, listen to episode 115 of Meg Gluckman’s podcast “Welcome to the Other Side”, “What you need to know about mortgages and divorce.” 


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