For many people, the thought of losing their family home when they get divorced is a major setback. Homeowners tend to have a lot of emotional attachments to their houses, especially if they have worked hard to renovate or upgrade them or if they have raised their children together there. Despite this reality, a home is also often the biggest financial asset a couple has. On the other hand, the corresponding mortgage is often the biggest financial liability a couple has.
The financial realities of home ownership make it important that divorcing spouses review their options carefully before rushing too fast to try and keep their home after a divorce. HSH explains that one factor to be evaluated is the potential tax implication of the sale of the home as a married couple before getting divorced versus later as a single person.
A home’s equity is another factor that may play into the ability for one spouse to keep the house. According to Bankrate, keeping a home after a divorce requires that couples do more than simply outline the responsibilities for the home and the mortgage in their divorce decree. If this is all that is done, the person who leaves the home could be putting their financial future at risk.
A joint mortgage will always be considered the responsibility of both parties in the eyes of the lender. Therefore, the person who keeps the house should get a new mortgage in their name only. This may or may not be possible due to their post-divorce income and credit score or due to low equity in the property.