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What happens to your mortgage if you get divorced?

What happens to your mortgage if you get divorced?

marriage certificate being cut in half

Once upon a time, in a house, you both adored, you were equally happy. But, as life changes, and sometimes divorce happens, you might be wondering someday, what would happen to the house you bought together if you were to get divorced. It’s a fair question and can be an emotional one at that. To help ease the stress of going through the breakdown of a relationship, here are the most common questions I’m asked about mortgages when it comes to dividing assets in a divorce. It’s important to keep in mind though that not every mortgage transaction is black and white, and I’m here to help answer any questions you might have and to help you navigate this new territory as your financial partner as well. Just give me a call at 705-315-0516, and we’ll work through each scenario together, one-on-one.


If I leave my house before the paperwork is finalized on our divorce will I lose my house?


Not typically. If you bought the house together, and you are/were legally married, the home will be divided accordingly through mediation or amicable decision process often in a 50/50 manner. Your entitlement to the property doesn’t change when you’re not living there so long as you’re still contributing to the payments during that period.


How will the value of the home be decided and how does that impact the mortgage?


When a house is divided as a financial asset usually the lawyer or mediator will recommend using a bank evaluation of the home to do so. However, it might be in your better interest to also get a letter of opinion from a professional realtor so that the home is divided at fair market value. Alternatively, you could also get a private home appraisal completed so that they use the average of all three instead of the lower value that you’ll see from the banks. After it’s been decided how the asset, your home, will be split, usually the current mortgage is discharged, and a new mortgage is created for whoever is keeping the home. Or, if the home is to be sold, there would be a penalty fee paid for breaking the mortgage and that would dissolve the mortgage contract after the home has sold. 


What if my partner wants to keep the house but, I want to sell it and how does that affect the mortgage?


This is a question you’ll need to work through with your lawyer or your mediator but, if one person wants to stay in the home, they have to buy out the other person at reasonable market value. If this is the case, the current mortgage is broken, and a new one replaces it that is solely in the name of the person keeping the home. The amount that the other is bought out for, is finalized in a financial discussion with your lawyers to work out a payment plan.


What happens when the down payment I paid originally was more than what my spouse put into the home? 


If the home was not contributed to in a 50/50 manner, that will be taken into consideration when discussing buyouts or division of assets. For example, if you contributed the down payment of $50,000 and the overall value of the home is $500,000 – a 50/50 split less the original down payment might be recommended.


If I bought a home before we were married, and then we bought a home together as our matrimonial home, is the other person entitled to the first home as well?


Dividing property and assets in divorce or separation can get a little tricky. Though you might feel that as you bought that home before the marriage the other person shouldn’t be entitled to it. However, unless you signed a prenuptial agreement before getting married, it’s usually counted in as a 50/50 split. However, there is tons of room for negotiating if you wanted to keep it, it would just have to be balanced out somewhere else in the overall deal. However, if you were common law, and have not been legally married, you’re entitled to keep the home you brought into the relationship as your own, and would only have to split the home you bought together, in both of your names, as a financial asset.


Big changes financially can be tough to deal with at the best of times, but adding into the mix strong emotions and hard feelings can make finalizing the smallest details feel impossible. That’s why it’s so crucial that you each consult your own advisors, have a voice in the conversation, and don’t rush through the decision making process. It’s also important to remember that although I have helped many clients through this tough transition to secure the mortgage they need to keep their home or to dissolve their current mortgage contract to be able to transfer it over to the other spouse…this is not legal advice. Consult your family lawyer and give me a call to help work out the financial questions and details when they come up at 705-315-0516. I’m here to help you navigate these uncertain times in any way possible as you transition into the next chapter of your life.

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