Are you currently in the middle of a divorce? If so, you’re not alone. After all, approximately 40-50 percent of all couples divorce.
Knowing that lots of couples divorce can be comforting. But, it doesn’t exactly make the process easier.
You’re likely feeling confused and have a lot of questions at the moment. For example, what happens to a house in a divorce?
This is one of the most common questions people ask when they’re getting a divorce.
If you’re currently in this boat, you have a few different options to choose from. Read on to learn what you can do with your house while going through a divorce.
Refinance Your Home
If one partner wants to continue living in the house and can afford to do so, one option is to buy the other partner out and then refinance the house.
In order to do this, you’ll first need to make sure you qualify for refinancing. Some qualifications you must meet include:
- You must own at least 20 percent of the equity in the home
- You must have a high credit score (at least 600, although over 700 is preferred)
- Your debt-to-income ratio should be no more than 38 percent (i.e., you don’t spend more than 38 percent of your take-home pay paying off debts)
Meeting these qualifications can be a challenge, even for the breadwinning spouse. This is because your child support or alimony payments will count toward your debt and can skew your debt-to-income ratio.
Move Out But Stay on the Mortgage
When you buy out your ex and refinance your home, their name gets removed from the mortgage and they are released from any financial obligation.
If refinancing isn’t an option but one partner wants to stay in the house, another option is for the other partner to remain on the mortgage while the other partner continues to make the payments themselves. This is known as a quitclaim deed.
When you sign a quitclaim deed, you forfeit your claim and right to the home. You also forfeit your right to sell the home and/or profit from the sale.
In order for this option to work, both partners need to be on relatively good terms with each other. The partner remaining in the house also needs to be reliable and make the payments on time.
If you’re the person who will be moving out, it’s important to make sure you trust your partner to uphold their end of the deal. Otherwise, they will negatively affect your credit score and could put you in financial jeopardy.
Assume the Mortgage
Typically, the only way a lender will remove one partner’s name from the mortgage is if you refinance the house. In some cases, though, the lender will allow one person to “assume” the mortgage and release the other person.
Talk to your lender and ask them if your mortgage loan is assumable.
In order to qualify, you’ll need to have a sufficiently high income (and be able to prove that income with tax returns and pay stubs). You’ll typically need to provide a copy of your divorce decree as well.
Both Parties Remain in the House
This might seem like a crazy idea, initially. But, many couples are choosing to continue living in the same house even after they get divorced.
There are lots of reasons for this, including:
- Less stress for children
- No increase in expenses
- No need to deal with refinancing or assuming a mortgage
Of course, remaining in the same house after a divorce can be quite stressful. If you take on this option, you’ll need to make sure you and your ex are on decent terms and can handle running into each other without any issues.
This can also be a good temporary solution while you work on selling your house or getting your finances in order so that you can eventually refinance or assume the mortgage.
Sell the House
Sometimes, the best option is to simply sell the house and split the profits.
If any of the following conditions apply, selling your house may be the easiest approach:
- You have some equity in the home
- The home is considered community property
- There’s no prior agreement regarding the interest in your home
Selling can be a good option. But, it’s not always the most efficient, especially if you’re getting a divorce during the “offseason.”
Ways to Sell Your Home Quickly
Traditional sales aren’t always easy. But, there are still ways to sell your house quickly.
Consider a Short Sale
In a short sale, your mortgage lender agrees to take less than the full value of your home and cancels the debt. Lenders often agree to short sales to avoid the costs of a foreclosure.
Short sales will negatively affect your credit score. They also come with tax implications. This is because the IRS views the debt cancellation as a form of income.
A short sale can still be a good option, though, especially if you’re facing foreclosure.
Find Someone Who Will Pay Cash
Another option is to work with a business that will buy your house from you as-is. They work quickly and can typically give you cash for your house within just a few days.
Working with one of these companies is especially beneficial if your house needs a lot of repairs, or if you can’t keep up with the payments and need to get out of it as soon as possible.
A house-buying company will often cover the closing costs associated with selling your house, too. This helps you save money and relieves a lot of the stress that comes with trying to sell a home.
Wondering What Happens to a House in a Divorce?
If you’re currently wondering, “What happens to a house in a divorce?” these options should give you an idea of the different approaches you can take.
If you live in the Colorado Springs area and are interested in selling your house quickly after a divorce, contact me today.
I can help you sell your home in as fast as 7-10 days!
