If you are getting divorced or dissolving a civil partnership, deciding what to do with your house is a major financial decision – especially if you share a mortgage.
Here are a few options to consider, according to the Money Advice Service. You can:
- Sell the home and both of you move out. You could use the money you have raised to put towards buying another home for each of you, if you can afford to do this.
- Arrange for one of you to buy the other out.
- Keep the home and not change who owns it. One partner could continue to live in it, perhaps until your children are 18 or leave school.
- Transfer part of the value of the property from one partner to the other as part of the financial settlement. The partner who gave up a share of their ownership rights would keep a stake or ‘interest’ in the home. This means that when it is sold he or she will receive a percentage of its value.
It is extremely important that both parties figure out all the expenses related to living in the home, including the mortgage, insurance, taxes, maintenance, etc. A mortgage obligation can tie up your credit and if there is a default, both parties will be sued by the mortgage company, regardless what the divorce settlement says.
According to Jody Bruns, a mortgage banker and president of the Divorce Lending and Real Estate Association in Chicago, spouses planning to count child support and alimony/maintenance as income for the purposes of qualifying for a mortgage should know that lenders will require proof of at least six months’ receipt of that income before closing.
Additionally, Fannie Mae guidelines require at least a three-year continuance of this income from the date of loan application.
You should not assume that your lawyer is well-versed in the particulars of mortgage guidelines, or that he/she knows what loan underwriters will be looking for in the settlement agreement.
Divorce Net, Published by NOLO
- Who Gets the House in a Divorce: Tips to help people navigate through this difficult issue
- Selling the House When You Divorce
- Negotiating a House Buyout at Divorce