4 TIPS FOR DEALING WITH YOUR UNDERWATER MORTGAGE DURING A DIVORCE
Many of our short sale clients here at Reid Real Estate Group are in the process of a divorce or have already divorced but still own property together. Often the family home needs to be sold during this difficult and emotional time, made even more so when the home is worth less than what is owed on it and short sale is the only way to ultimately dispose of the property.
When upside down in the home, the best time to address this is now, before the divorce is finalized.
It is certainly an emotional time and it is inconvenient to deal with short sale in the middle of a divorce. However once one party has moved out and time has passed, it is much more difficult to coordinate a short sale as both parties must be involved. Generally the party having moved on is much less vested in the outcome, particularly if they have filed bankruptcy. This may leave the other party holding the bag and unable to do any workout with their lender, leading to devastating consequences such as foreclosure.
A quit claim deed will transfer the ownership interest but does nothing to change the responsibility for the mortgage.
This is by far the most misunderstood concept in the divorces I see. Even if one party quit claims their interest of the property to the other, if both were on the loan, both will remain on the loan! Not even a court order ordering financial responsibility to one party will change this.
Any future defaults will affect both parties and their credit, and if a short sale comes into play both ex-spouses will need to co-operate to get the sale done. Also, if you are the one considering moving out and leaving the home to the other this financial responsibility may make it difficult for you to purchase another home. You may never be able to buy until you have gotten out from under the existing mortgage.
A loan modification won't remove anyone from the mortgage.
The common thought is that if the payment were just lower, one party could afford to stay and pay for the home on their own, or the mistaken belief that a loan modification through the existing lender will get one spouse off the loan.
While you may get a lower payment – a loan modification will NOT remove anyone’s responsibility to pay, leaving both parties on the mortgage even despite a more affordable payment.
Moving out may become an issue.
Most of the time, one or even both parties are in the process of moving out of the shared home. It is very important to time this properly especially in a pending short sale situation as some lenders will in fact deny a workout like a short sale if the home has been vacated. Before moving out of a home you may want to short sell, it’s always best to ASK THE PROFESSIONALS FIRST!
Need help with your home sale during a divorce?
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We are grateful to Minna for her knowledge, professionalism and expertise in short sales. She truly cares about her clients and it is evident in the manner she represents them. She has a strong work ethic and keen negotiation skills when dealing with financial institutions and buyers. We strongly recommend Minna and her company if you want immediate results.
T.G.
Last Updated on September 29, 2025 by Minna Reid