Divorce and Your Mortgage: What You Really Need to Know!

In many Michigan cases when a couple gets divorced, they have to figure out what to do with their home and mortgage. This can be a source of great dissent during the divorce process, especially if they can’t find a way to agree on what’s best for everyone. Divorce attorneys around Lansing deal with this issue daily. We can usually resolve these property issues without need for the judge’s help. 

If kids are involved, it’s common for one spouse to want to keep the home (if that’s a financial possibility) simply in order to maintain some sense of continuity for the children. But making a decision about what to do with your home is only part of the process. There are other things that need to be taken into account as well. 

Your mortgage company has policies you’ll have to adhere to

Many lenders have policies about just shifting a mortgage into one spouse’s name, especially if both spouses are on the mortgage document. So deciding that one of you is going to assume the mortgage might be an easy choice to make between the two of you, but your lender isn’t likely to agree.In fact, most mortgages are not assumable these days. That leaves just two options. 

One option is for a divorce attorney to ask the mortgage lender to release the other spouse from liability for the mortgage. That facilitates one spouse keeping the house and mortgage and gets the other spouse off the hook for the mortgage payments. Unfortunately, this option is also rare these days. The remaining option and the most common process is for the spouse that is keeping the house to refinance the home mortgage to get the remaining spouse out from under the mortgage. 

So what would you have to do in order to get your spouse off the mortgage if you’re the one who wants to keep the house? Or get your own name off the mortgage if your spouse is keeping the house? Chances are, whether you live in Haslett, Grand Ledge, Okemos, DeWitt or Mason, you’ll need to refinance your home

Why is it important to remove your name from the mortgage?

If you’re the one planning on moving out and leaving the home to your soon-to-be-ex, it’s very important to have your name removed from the mortgage. This is because the mortgage company doesn’t care about your divorce decree. It makes no difference to them what the court says about who gets what, or which one of you is responsible for which bill. 

If your name is on the mortgage then you are financially responsible to the mortgage lender for that house. Can you imagine how awful it would be if you moved out, found another home to live in, and then your ex lost their Lansing-area job and couldn’t make the mortgage payments anymore. If your name is still on the mortgage, then you’ ll have to pony up the funds, or be pursued by collection agencies.

There are other things to keep in mind as well.

Refinancing isn’t cheap, especially in Lansing, Holt and Okemos. You and your spouse will need to figure out who is assuming the cost of the refinance. And for many women who have been at home with children while their spouse worked, they have no work history or way to prove a steady income. Lenders want you to be able to prove steady income in order to refinance in your name, which can be challenging to say the least.

For those who will be relying on alimony or some form of spousal or child support, this can significantly delay the refinancing process. Most banks will want to see records of those payments being made regularly and on time before they will count them as income. So you may have to wait months after a divorce is final before you can refinance.

Another very important reason that top divorce lawyers insist on removing names from the mortgage loan is that the spouse who isn’t keeping the house might want to apply for different mortgage or loan in the future. However, if they’re still legally responsible to the original mortgage lender, that obligation will factor into debt to income ratio. This often disqualifies them from getting additional credit. 

Figuring out what to do with your home can be a major decision

As you can see, there are several things you need to keep in mind when making plans (or even just considering what you may want to do) when it comes to your mortgage and your divorce. There are lots of details to work out, and many factors that influence what’s going to be best for you and your family. Which is why you’re going to need help.Getting professional help before you begin the divorce process is always the most efficient and cost effective option. Looking backward and hoping to do damage control to cover errors is time consuming and very expensive. 

At The Kronzek Firm, our family law attorneys have decades of experience helping people in Ingham, Clinton, and Eaton Counties to navigate their divorces. From asset division and child custody, to alimony and parenting time, there is nothing we can’t help you with. So if you live in or around Lansing, DeWitt, Charlotte, East Lansing, or Jackson, and you’re ready to end your marriage, call 517 866 1000 to schedule your free phone or Zoom consultation.