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What happens to your home after a divorce?

Many married couples make a huge financial investment in a home with the idea that they will stay together and pay off the mortgage down the road. But if things did not go like you had hoped and the marriage ends before the mortgage is paid off, what happens to the loan when both your names are on it?

There are several options for handling a home loan during divorce. Choosing the right one is a matter of your financial circumstances, your credit score and the preference of your ex.

Should you sell the house?

Perhaps the simplest way to end the debate and discussion is to sell the house, although many couples resist this idea because they have made memories there and may even still have children at home. It is also difficult to sell if the market is not doing well and you are forced to take less than you owe on your loan. If one of you cannot afford to pay off the remaining balance, then selling may not be your best option.

Should you refinance the loan?

If one spouse moves out and the other decides to stay in the marital home, another option is to refinance the house with only one name on the loan. However, this can become problematic if neither spouse has the credit or financial means to qualify on their own.

Should you keep it?

If you do not want to sell and neither one of you can afford the house on your own, you have the option to keep the loan the same and either live together, have one spouse move out or rent the house. These situations require a degree of trust and confidence, because if your ex stops paying, the defaulted loan could affect your credit.

Protect your future

As with every aspect of your divorce, how you handle the mortgage should be thought out and discussed before you decide. If you are facing a divorce and are not sure what to do with your home, speak to an attorney about your options.

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