Houses are often a complicating factor when a couple divorces. You will likely have invested a lot of your marital income into the purchase and maintenance of your shared home. Often, couples combine their income to qualify for more financing together than either spouse would qualify for on their own.
Unfortunately, if you haven’t been at your house for very long or if you’ve recently refinanced and cashed out equity to pay off credit cards or go on a vacation, you may have a high balance on your mortgage.
What options do you have in a divorce where your mortgage balance is particularly high?
You may not be able to assume the loan alone
You will need a better credit score or a more significant down payment to qualify a loan for the same amount of financing that you shared with your spouse previously. The chances are good that you will have to pay a higher interest rate and that your principal balance will go up even more than it is now, as you may have to share whatever little equity you have in the home with your spouse.
Even when you factor in child support, spousal support and your work income, you may not qualify for a mortgage when you have a high balance on the property. More importantly, even if you do qualify, it may be very hard for you to cover all of your cost of living expenses while paying your mortgage. When you have a high balance on the mortgage, it may make more sense for you to sell the home or let your spouse keep it instead.
You don’t lose your interest in the house just because you don’t live there
You don’t have to maintain ownership or possession of your home to retain your financial interest in it when you divorce. If your ex keeps the property, they will need to compensate you for your share of the equity in it either while refinancing or with other assets.
If you decide to sell the house, you will receive an appropriate share of the proceeds from that sale. That money could be an important nest egg that helps set you up for better stability and a more reasonable home for yourself after the divorce.
Learning more about the basics of property division can help you plan for your divorce and your future afterward.