Getting a divorce can be a difficult process, both emotionally and financially.
One of the many questions that often come up during a divorce is, “What happens to the mortgage when you get divorced?”
A lot depends on what the respective parties want, their needs, and finances.
In this blog post, we will explore what happens to a mortgage when you get divorced in North Carolina.
We think it’s a good idea to carefully consider your financial obligations and options. I ask clients from the outset ‘What’s important to you?’ It’s OK if that changes over time – Meredith Shuford, Lincolnton Divorce Lawyer
Divorce lawyers in Lincolnton NC may also address issues such as:
- Is the mortgage loan handled as part of a divorce settlement or separation agreement?
- Who is responsible for making the monthly mortgage payments until the divorce is granted?
- Who keeps the house in the short term and long term?
- Is a quitclaim deed needed to transfer ownership?
- What happens to your credit history?
We will also provide some tips on how to handle this situation.
The Teddy, Meekins, and Talbert law firm is available for legal consultation if you have further questions and wish to retain legal counsel.
Please call now to schedule a consultation with a divorce lawyer and to confirm the availability of our firm for legal representation.
Divorcing with a mortgage is a solvable challenge
First and foremost, we understand how overwhelming the process of separation and divorce can be.
There are a lot of moving parts.
Divorce can also be influenced by emotions and hard feelings.
Sometimes people proceed out of vengeance, rather than apply common sense.
That’s unfortunate, as the financial consequences of separation and divorce in and of themselves can be substantial.
Divorce involves more than just ending an interpersonal relationship.
There are important financial issues to resolve once the parties to a marriage decide to call it quits in North Carolina.
We think getting divorced merits careful planning, thought, and execution.
Before doing anything or signing any paperwork, we strongly recommend you seek legal counsel.
Who is responsible for the mortgage and do I need a quit claim deed?
If only one person is on the mortgage loan, then that person may be solely responsible for making the mortgage payments in the short term.
If both you and your spouse are on the deed of the house, a quitclaim deed may be appropriate for one person to be removed from the mortgage in the long term.
Financial issues (including equitable distribution) are generally addressed over time, which may be longer than you might expect or want.
In North Carolina, the NC Divorce Laws mandate a one-year period of legal separation before a divorce may be granted. In the meantime, it makes sense to protect what often is the largest investment in a martial estate. . .your home – Meredith Shuford, Divorce Lawyer in Lincolnton NC
Is litigation necessary?
The parties may agree to terms prior to the expiration of the stated one-year waiting period, settling major issues involving Equitable Distribution and Support without the need for formal litigation.
In the event the parties cannot resolve financial issues and/or disputes vis-à-vis a divorce settlement, litigation and a trial in divorce court may ultimately prove necessary.
What happens if my spouse refuses to pay the mortgage?
It is important to note that even if only one spouse is on the mortgage loan, both spouses may still be liable for the marital debt in the long run.
This means that if your ex-spouse stops making payments on the home loan, credit cards, and other debts, credit scores can be adversely affected.
The mortgage lender expects prompt, full payment.
Failure to make timely payment on the “note” can result in long-term consequences and possibly trigger something lawyers refer to as an acceleration clause.
The effect of an acceleration clause within a home loan can be financially devastating; it’s important to protect your credit score both during and after a divorce.
What is an acceleration clause?
An acceleration clause is a provision in a mortgage loan agreement that gives the lender the right to demand immediate payment of the entire balance of the loan if the borrower misses a payment or violates some other terms of the agreement.
Most mortgage loans contain some form of acceleration clause, often triggered by the failure to pay the existing mortgage on the property.
Obviously, mortgage payment issues triggering an acceleration clause can have a domino effect, causing problems with the primary residence as well as vacation homes and business properties.
If you are going through a divorce and are worried about what will happen to your mortgage, credit scores, and home loan, we can help.
The Teddy, Meekins, and Talbert law firm is available for legal consultation.
Once properly retained, we can review your individual case and offer guidance on how to proceed.
Please call now to schedule a consultation with one of our divorce lawyers and to confirm the availability of our firm for legal representation.
What happens to your credit score?
Your credit score may drop when you divorce, especially if you have joint accounts with your ex-spouse.
There are several different reasons for such.
It could be because your payment history may be reported separately, resulting in a missing financial history.
That can cause problems if you wish to qualify for a refinance or new mortgage.
Furthermore, if you have a history of any late payments or delinquent accounts, it very well can show up on your credit report, thus potentially lowering your credit score.
Do I need a financial adviser?
Divorce lawyers often work with financial planners, accountants, and advisers in helping explain your options.
If you decide to keep the house, you should also be aware that you likely will be responsible for all repairs and maintenance.
Selling the house is also an option; this way, both parties can walk away from the property without any financial obligations.
Each divorce, like each individual relationship, is special and unique.
Your individual needs and goals are an important part of the calculus.
Who owns the house?
In some cases, one spouse may want to keep the house and pay the mortgage lender (home loan) directly, while the other spouse wants to sell it, thus possibly freeing up equity and improving their debt to income ratio.
In North Carolina, it’s common for both parties to jointly own the primary dwelling, the house, as “tenants in the entirety.”
There are notable exceptions, especially in instances where there may exist a prenuptial agreement or other formalized agreement between the married parties pertaining to both real estate (residential and business) as well as other personal assets.
Do I need a lawyer for a divorce?
Given the complexity of financial issues, we think It is important to discuss your options with an experienced divorce lawyer.
If you wish to work out terms in a divorce settlement and retain possession of the home, you will first need to figure out if you can afford the mortgage on your own and if you can qualify for a loan modification.
Is refinancing an option?
If you want to keep the house after a divorce, you may need to refinance the mortgage in your name only.
That may require a new mortgage or determining if the lender agrees you will qualify for a refinance in an individual capacity.
You may need to get a cosigner or apply for a new loan altogether.
If you’re planning on getting divorced, it’s important to understand how it will affect your credit score, your ability to refinance, and your monthly payments.
By understanding these things ahead of time, you can make the process as smooth as possible.
Divorce FAQs in North Carolina
If you own a home with your spouse and are considering divorce, here is what you need to know about what happens to your mortgage:
- In many cases, both spouses are responsible for the mortgage payments.
- If one spouse stops making payments, the other spouse may still be legally obligated to continue paying or risk losing the house.
- If you can’t afford to keep up with the payments on your own, then selling the house may be your only option.
- If you decide to sell, you will need to figure out how to divide the proceeds from the sale.
This can be a complicated process, so it’s important to consult with an experienced divorce attorney.
We can help you determine what is fair and equitable under the circumstances.
Can I “buy out” my spouse’s interest in the home?
Another option is for one spouse to buy out the other spouse’s share of the home.
It’s also possible to refinance the mortgage in your name only.
This may require some financial juggling, but it could allow you to keep your home after divorce.
Can you keep the home and mortgage?
If you want to keep the home and mortgage in your name, you may need to refinance the mortgage in your name only.
This can be a difficult and costly process, but it may be worth it if you have strong sentimental attachments to the property.
Keep in mind that you will be solely responsible for making the mortgage payments if you choose this option.
If your spouse is listed on the title of the home, they likely will need to sign a quitclaim deed giving up their ownership rights to the property.
Once this is done, you can proceed with refinancing in your name only.
Again, this process can be expensive and time-consuming, but it may be worth it if keeping the home is important to you.
Will I be required to sell my home?
Another option is to sell the home and use the proceeds to pay off the mortgage.
If you have equity in the home, you may be able to keep some of the proceeds after paying off the mortgage.
You will need to come to an agreement with your spouse about what to do with any remaining equity.
Still have questions? Give us a ring
If you’re getting a divorce and are worried about what will happen to your mortgage, you’re not alone.
It’s a common concern, but there are some things you can do to protect yourself.
If you have any questions about your specific situation, we encourage you to contact an experienced divorce attorney.
They can help you understand your rights and options under the law.
It’s important to understand how your mortgage will be affected if you decide to get divorced.
There are a few different scenarios that could play out, and it’s important to be prepared for all of them.
If you have any questions, please don’t hesitate to contact us.
We can help you understand your options and make the best decision for your situation.
You don’t need to go through this alone.
We think obtaining sound legal advice helps make the decision-making process a bit easier, especially when it concerns a divorce agreement with your soon-to-be former spouse.
As well-meaning as family and friends may be, there is no substitute for the advice provided by an experienced legal professional.
Thanks for reading!
A native of Lincoln County, Meredith A Shuford is proud to work for the people in the community where she was raised and has chosen to raise her family. Ms. Shuford’s desire to assist those in crisis is paramount to her decision to focus on family law.