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The potential implications a divorce has on your mortgage

On Behalf of | Dec 2, 2023 | Divorce

Divorcing couples in Massachusetts typically have valuable assets to think about. For most marriages, there’s nearly nothing more important than the future of their marital home. As you can imagine, the decision to divorce can also leave a mortgage’s future in jeopardy.

Refinancing can yield unpleasant surprises

Mortgage assumptions are nearly impossible, meaning one person in a marriage simply removes their former spouse’s name from this legal agreement. This situation means that refinancing a mortgage is the ideal way to take over ownership of a marital home. Whether or not refinancing is a smart decision depends on interest rates. Lower interest rates can lead to lower mortgage payments. But higher interest rates can make a marital home more expensive than ever before.

Potential credit-related impacts

Whether using it as a rental property or otherwise, maintaining a joint mortgage with your ex-spouse can be an unwise decision if the other party isn’t making payments. You might be unaware that a missed payment from either party in a joint mortgage harms both parties’ credit. If you regularly pay your portion of a mortgage and your former spouse doesn’t pay their share, you and this person’s credit takes a hit for each missed or partial payment.

Don’t forget about tax implications

Getting a divorce with a house on the line also has tax-related implications. These implications involve whether or not married couples sell a home jointly or separately. In some cases, joint sales can lessen or eliminate home-related tax charges. However, divorcing and selling a marital property as its sole owner lowers your capital gains tax exemptions.

If you agree to take on a home’s mortgage by yourself, know beforehand if this decision is financially feasible. You could deal with unwanted financial surprises if you’re unprepared for mortgage-related changes.