Mortgage and Divorce

Can I Keep My Home In a Divorce?

Classic books on a tabletop.
Keeping your home in a divorce requires everyone to lay their goals on the table.

The keyword in the answer to this question is “amicable” as in the communication and resulting terms being such. With the support of the goal of one party keeping the house by both parties, it can be done. If one spouse is against the idea then the project just went from a walk to a hike up a rocky incline, into dark skies. 

Here are the concepts you’ll need to come to an agreement on:

  • Does the departing spouse classify the objective with significant importance (do they want the remaining ex-spouse to hold on to the house? Is it a shared goal/outcome?
  • Can any agreed-upon equity extraction be deferred to a date in the future (for the sake of one party keeping the home)?
  • Can the existing mortgage be left in place? And can it be afforded by the staying person?
  • Is there a HELOC in place to help with shorter terms needs?

The potential combinations of answers from the above questions will make each situation highly individualized. Mapping all the possibilities will take all the pages in a notebook. But each individual situation really only has a couple of ways it could go.

There are two occurrences that you may not be aware of, yet you should be.  

Visual components: where you live, the physical home, school district, length of a commute are obvious. But the components needing the most planning are invisible. 

  1. Transfer of Equity. How much equity is a departing spouse entitled to? When do they receive it? What if the house is underwater (worth less than what is owed?). 

The Equity component and the transfer of what is owed is a massive piece of this project.

The spouse who retains the home cannot simply ‘Pick up some overtime or more shifts at work to cover the position. Without a navigation plan here, the ship will never leave port.

  1. This is an Off-Market Sale. But you ask “wait, I just want to take over the payments and don’t want to actually sell the house”.   I get that. Dropping one owner from the Deed requires the current Deed to be replaced with a new Deed (a new Deed is a transfer (sale) even if no money is exchanged). A mortgage holder with an interest against that Deed will get notified of the “sale”. It would be like selling your car without first paying off the loan. You need their permission to sell. Otherwise, a string gets pulled and a small attached bell rings in the legal office of the mortgage company. You accidentally trigger the “Due upon Sale” clause of your mortgage contract, a foreclosure mechanism that is contained in every standard mortgage ever written.

The first step to the success of this mission is laying out all the goals on the table.

The next step is designing the architecture to help support the mission. 

We may just be the only architects in the mortgage industry and we’re here to help you, our guidance is free anytime you need us.