Who Pays for a Joint Mortgage Loan after a Divorce?

A joint mortgage loan allows two individuals to share the burden of paying the debt on a house. While sharing the burden, both people also get to share in the rewards. For example, a couple can get a larger loan by combining their incomes on the application. Both parties will also receive credit for the payments made and the equity received. Unfortunately, if a marriage is terminated, joint mortgages can be very difficult to resolve. 

Determining Ownership of the Home

Sharing ownership of a debt is not the same thing as sharing ownership of a home. Regardless of how the mortgage was structured, it is likely the names of both individuals in a marriage are registered with the county or city as owners of the property. In most cases, this will need to be changed so only one person retains ownership of the home in the future. It does not matter who contributed more to the mortgage in the eyes of the city. However, a court may be able to decide which person has a greater right to remain in the home. How the equity will be split becomes a difficult situation to resolve.

Resolving Ownership of the Debt

Once a couple has decided how to deal with splitting the equity of the home, they will have to determine how to split the remaining debt. Even if only one name is on the home deed, there may be two names on the mortgage. Again, the law does not care who made the greater payments each month. Both parties share equal responsibility to make the payments in a joint mortgage. It is very possible one person will not be able to continue making payments on the home without the assistance of the other. In this case, the process of moving the loan into a single owner's hands is more complicated.

Refinancing to a Single Mortgage

One option to move to a single mortgage is to entirely refinance. The borrower who will retain the burden of the debt will take a new loan in the sum remaining on the current mortgage. The mortgage will be paid off, and this person will continue with payments on the new debt. This only works if the sum is manageable for a single person to handle. Further, the other party must be willing to give up all the equity he or she has contributed to the mortgage thus far. 

Selling the Asset

A common way to handle all of these challenges is to simply sell the asset. If more remains on the mortgage than is made in the sale, the two parties will share the burden of paying off the remainder. If the asset nets a profit, the profit can be split between the parties as agreed upon between them or by the court. The main issue with this resolution arises because there are typically strong feelings regarding who should get to keep the house in a divorce. If both parties are being reasonable, and it is a good time to sell, though, this option is usually the easiest.