The Piper Must be Paid: The Mortgage in a Divorce

One of the largest assets a married couple normally own is the marital home, and one of the most important decisions spouses make when they divorce involves the mortgage. For most couples parting ways, a decision about the mortgage must be made. Most couples own the marital home jointly, as tenants by the entirety, so there has to be a decision about which one gets the homestead  — and who pays the mortgage.

Divorcing couples can deal with the marital home in one of three ways: one, they sell it, settle the mortgage and divide the equity; two, one spouse “buys out” the other spouse’s interest; or three, one spouse takes the house and lives in it for time and the couple sell it at a later date.

Options two and three involve a consideration of the mortgage.

One way or another, either by agreement or court order, one spouse is assigned the house. Normally, that party becomes solely responsible for the mortgage. The divorce decree may stipulate that the party staying in the house assumes the mortgage, or it may say that the party staying in the house has so long to sell it and then free the mortgage lien, or it may require a refinance of the property.

The spouses must remember that “a divorce decree does not trump a mortgage contract.”  Even when one spouse takes over possession of the house, the other party can still be legally responsible because his or her name is still on the mortgage note. The only way to remove a party from a responsibility for the mortgage is refinance the property in one person’s name alone, or to satisfy the mortgage entirely.

If the party in possession fails to pay the mortgage, the parties on the note – normally both spouses – are responsible.

For a more in depth look, here is a great research manual titled, “What Happens to the Marital Home Upon Divorce“.


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