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Divorce: Staying on the Mortgage After You Move Out?? It's RISKY!

(Both the video and article offer distinct perspectives and information. Be sure to check out both for a comprehensive understanding. The video provides visual clarity, while the article delves into specific details. Together, they provide valuable insights to help you navigate your situation effectively.)

In Texas, where deficiency judgments are a possibility after foreclosure, navigating a divorce where one spouse remains in the marital home while the other moves out requires careful consideration regarding the mortgage. Here's why staying on the mortgage can be risky for the spouse who leaves:

Financial Burdens:

  • Continued Liability: Even if your ex-spouse agrees to make the mortgage payments, you're still legally responsible if they default. This can damage your credit score and strain your finances, even if you're not making the payments yourself.

  • Deficiency Judgments: If the property goes into foreclosure and sells for less than the outstanding mortgage balance, you could be held liable for the remaining debt in a deficiency judgment.

Challenges When Buying a New Home:

  • Debt-to- Income Ratio (DTI): Since your name remains on the mortgage, it's still considered part of your debt obligations. This inflates your DTI ratio, making it harder to qualify for a new mortgage with a good interest rate, even though you're not actively making the payments.

  • Down Payment Savings: While your ex-spouse may be covering the mortgage payment, you're still technically responsible. This can affect lenders' perception of your financial stability and limit the amount you can qualify for. The ongoing obligation on the old property essentially reduces the disposable income you have available to save for a down payment on a new home.

Protecting Yourself During Divorce

Here are some options to consider when discussing the marital home and mortgage in your Texas divorce settlement:

  • Refinance: If your ex-spouse has sufficient income and creditworthiness, they might be able to refinance the mortgage in their sole name, removing you from liability.

  • Sell the Property: Selling the property allows you to split the proceeds according to the divorce agreement and completely remove yourselves from the mortgage.

  • Buy Out: If your ex-spouse wants to keep the house, they can potentially buy out your ownership stake by paying you a lump sum or transferring assets of equal value. This removes you from the mortgage.

Important Considerations:

  • Legal Advice: Consult a real estate attorney specializing in divorce cases to understand your rights and obligations regarding the mortgage and property ownership. They can help you negotiate a fair settlement that protects your financial future.

  • Financial Planning: Consider the long-term financial implications of each option. A financial advisor can help you weigh the benefits and risks associated with different approaches.

Remember, the best course of action depends on your specific financial circumstances and the terms of your divorce agreement. Open communication with your soon-to-be ex-spouse and seeking professional guidance from an attorney and financial advisor can help you navigate this complicated situation effectively.

As a Realtor, I've encountered numerous instances where individuals found themselves hindered from moving forward in life due to being unaware of the debt-to-income scenario. Years after their divorce, when attempting to purchase a new home, they faced obstacles due to their previous mortgage obligations. However, there are solutions available. If you find yourself in this situation, don't lose hope.

Let's discuss your options. I work closely with a team of lenders who can assess your situation and explore avenues to either remove your name from the mortgage or reduce the negative impact or consequences of being on the mortgage after a divorce. Together, we can navigate this tricky obstacle and help you move forward with confidence.

Amanda Allen, Realtor


(903) 603-0648


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