Since most couples have a joint mortgage – one where both names are on the mortgage and title of the home – when separation or divorce proceedings get underway, many wonder what will happen with the home.
When the marriage comes to an end, there are two obvious options concerning the home: 1) sell the property and split the proceeds according to your agreement and go your separate ways; or 2) one person buys the other party out of the mortgage and the title of the property.
The first option is a straight-forward transaction where you put the house up for sale, sell and split the proceeds. The second option, however, is slightly more complicated.
The decision between the options is a personal one borne out of the specific circumstances of the parties involved. Perhaps there are young kids involved that need to stay in the house, the market is down and there will be a loss on the property that neither party can afford, one party can afford to buy the other party out, etc.
Once the decision is made, how do you go about buying the other person out of a mortgage? Well, essentially, you’re refinancing your mortgage using a single income (the person who’s buying the other party out of the house) and qualification, versus the original purchase, which was based on joint income and qualification.
If you’re the one buying your partner out, the first step is to ensure that you can afford the mortgage payments.
By: Jorge Hernandez