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Dealing with a mortgage during a divorce

On Behalf of | Nov 27, 2023 | Family Law

When divorcing couples in Massachusetts enter into property division negotiations, the family home is usually the first asset they discuss. They can choose tp sell the home, pay off the mortgage and then divide the proceeds, or one spouse could relinquish their claims to other marital assets in order to remain in the home. When estranged couples discuss these matters, they should bear in mind that lenders are not bound by the provisions of divorce settlements.

Paying off the mortgage

This means that divorced spouses remain legally responsible for making mortgage payments even if their negotiated divorce settlement agreements state otherwise. If a joint mortgage is not paid off when a couple divorces, the spouse who moves out of the home can be pursued for delinquent mortgage payments months or even years later. The mortgage would also remain on the credit reports of both spouses.

Obtaining a new mortgage

To pay off the existing joint mortgage, the spouse who wishes to remain in the home must take out a new loan, which could be difficult if the spouse does not work or earns only a modest income. If the spouse is able to qualify for a mortgage, the interest rate may be higher than the rate on the original loan. This means the new payment could be higher than the old payment even though the amount being financed is lower.

Being pragmatic

Lenders seeking payment of delinquent debts are not deterred by divorce settlements, which means joint mortgages should be paid off when couples divorce. If one spouse wishes to remain in the primary residence, they may find qualifying for a mortgage difficult. Living in familiar surroundings provides emotional stability, but remaining in a family home after a divorce is not always financially prudent.