What Will Happen To Your Mortgage When You Divorce?
California’s community property laws require divorce courts to divide a couple’s marital assets and marital debts equally in half, unless the couple has signed a prenuptial agreement indicating otherwise. If the couple does not have a prenup, all assets acquired during the marriage (with the exception of inherited property and gifts) are considered marital assets. Likewise, all debts incurred during the marriage are considered marital. For purposes of assigning assets and debts as marital and dividing them in a divorce, it does not matter whether both spouse’s names are on the deed to the property or the loan agreement or only one. Home mortgages are the biggest debt owed by many couples, and there are several ways that divorce courts can deal with mortgage debt. For help getting the court to assign responsibility for the mortgage in a way that does not create an excessive financial burden or liability for you, contact a San Jose divorce lawyer.
Dividing Responsibility for the Mortgage
Even if only one spouse’s name is on the mortgage loan, California law still considers it a marital debt. Especially if the court grants the lower-income spouse the right to continue living in the marital home, the court will account for the higher-income spouse’s responsibility for half of the mortgage payments when calculating alimony or child support. If both spouses are in an approximately equal position when it comes to income and the value of their separate property, the court may order one spouse to buy out the other’s spouse’s share of ownership in the house, even if they still owe money on the mortgage.
Refinancing the Mortgage
In some cases if one spouse buys out the other’s interest in the house, the court orders the couple to refinance the mortgage so that it is only in one spouse’s name instead of both. This could simplify things, because it means that the mortgage lender can no longer come after you if your ex-spouse falls behind on mortgage payments. It could also create new problems, especially if the remaining balance on the mortgage is high, because you might get a much higher interest rate on the refinance, if you even qualify at all.
Selling the House
In many cases, the simplest solution is to sell the house and divide the proceeds of the sale equally; if you do this, the mortgage lender will get the money you still owe them. Selling a house is stressful even when you are happily married. If you are going through a divorce, your spouse might go out of their way to make the process as stressful as possible for you. Your lawyer can help you accomplish the sale in a timely manner, even if it involves going back to court and requesting court orders related to the sale of the house.
Let Us Help You Today
A divorce lawyer can help you with the conflict-prone process of selling your house or refinancing your mortgage while your divorce is in progress. Contact Foster Hsu for help today.