Divorcing Your Spouse…And Your Mortgage

Since the real estate crisis of 2008, dividing real estate in Texas divorce proceedings has become increasingly difficult. In the past, couples would bicker about who would get to keep the house, or whether a party was getting their fair share after selling the marital home. Now they fight to be removed from the mortgage.

Some couples want to avoid a short sale to preserve favorable credit ratings, so they look to refinance the property so that party keeping the house will pay for it on their own, and the party leaving the house will no longer be financially connected to it.

Unfortunately, refinancing has been considerably difficult in the current financial climate. The lack of equity in a home is usually the problem, as home values have plummeted since the crisis. Also, a person seeking to refinance may not have adequate income, or credit issues may present significant obstacles.

In these instances, divorcing parties will have to think creatively and consider several alternatives, such as the federal government’s Home Affordable Refinance Program (HARP 2), which allows homeowners to refinance even if they are upside down in their mortgage (have negative equity). Another option is to agree on a 1-2 year waiting period where spousal maintenance or child support payments can be documented as income for refinancing purposes. A party can also consider including a co-signer on the new mortgage.

Ultimately, divorcing couples must move past their emotions and focus on making sound economic decisions for themselves. Recovering financially after a divorce is just as important as an emotional recovery. An experienced family law attorney can provide you with resources and other financial professionals to help in making a decision on your home.

Source: Nasdaq.com: “How to Divorce Your Mortgage” January 26, 2012; “4 Ways to Get Your Spouse to Say ‘I do’ to a Refinance” November 23, 2011