Dealing with the marital home’s mortgage during divorce

When spouses choose to divorce in Kentucky, the decision over how to handle the marital home can be complicated. Depending on the amount of equity at stake, the family home may be the most significant jointly held asset. If the house is not sold, one spouse will generally walk away from the divorce in possession of the property. However, ownership comes with significant financial costs.

Dealing with the mortgage can be a major concern. If the original joint mortgage is kept, both spouses remain fully responsible for the debt. However, any default can be seriously damaging to both parties’ credit, so many spouses want to end this entanglement when the divorce is completed. In other cases, the joint mortgage is refinanced into one spouse’s name. This can present some challenges, because one spouse will need to show the income and capacity to pay for the entire house on their own credit alone. In other cases, one spouse can assume the original mortgage if the original loan documents allow for loan assumption.

Many people are unfamiliar with how assumable mortgages work. This can be a favorable option for someone with a good rate or payment record for their existing mortgage, especially because it can prevent a move to a higher interest rate. It can also be less expensive than taking out an entirely new loan. However, the spouse who wants to assume the loan will need to show the same kind of proof required for a refinance, such as creditworthiness and sufficient income.

An individual who is planning to divorce may have serious decisions to make about how to handle the family home. A family law attorney could work with a divorcing spouse to negotiate a fair settlement on a range of issues, such as property division and spousal support.