How a Divorce Affects Your Mortgage Loan?

When a couple gets a mortgage loan together, they don't necessarily count on what is going to happen if they get a divorce, because no one ever plans to get one. It can be a sticky situation, especially if both spouses want to keep the house. Regardless of who is going to move out and who is going to stay, the idea of how the change of situation will impact the credit score--and thus the ability to get another mortgage after the divorce--is something many couples find themselves worrying about when faced with divorce.

Try Refinancing the Mortgage Loan

If both spouses can agree on who will stay in the home and who will leave, it may be a good idea to refinance the loan, with the person who is staying as the only borrower. There are some instances where this will not be possible, however. If more is owed on the home than it is worth, it may be difficult, or impossible to refinance the loan. If something about the spouse's credit independently of the other spouse prevents them from qualifying for the loan on their own, this could make it difficult or impossible to refinance the loan. If the loan cannot be refinanced, both spouses remain equally responsible for the debt as far as the bank is concerned. The couple will have to work out an arrangement with their lawyers during the divorce proceedings to determine how to best handle the situation.

Try Selling the Home

Selling the home will relieve both spouses of the financial obligation, and require that they split the profit. This way both people can put a little money in their pockets they can use to start their lives independently of each other. If the house sells for less than what is owed on it, the spouses can work together with their lawyers to determine how to split the remaining balance on the home.

The bottom line is that banks are not going to care if the couple on the loan is divorced or not. They are not going to care who is living in the property and who isn't, so long as the mortgage gets paid. If the mortgage does not get paid, steps to foreclose on the home will be taken, which will harm both spouse's credit rating, making it far more difficult for them to purchase another home in the near future. Talk to the mortgage company to see if there is anything they can do to help the situation, but always make a plan to ensure the payment is made on time to protect your credit rating.