What Happens to the Mortgage in Divorce?

One of the most complicated financial issues in a New Jersey divorce is what happens to the family home and, equally important, the mortgage attached to it. For many couples, the house is their largest asset and the mortgage their largest debt. Deciding how to divide both fairly requires careful planning, negotiation, and often court involvement. Learn how New Jersey courts approach this matter. For help with property division and other issues in your divorce in Union, Essex or Middlesex County, contact the Law Offices of John B. D’Alessandro to visit with an experienced Union equitable distribution attorney.

The Home as Both Asset and Liability

In divorce, a home is unique because it is both an asset (with equity value) and a liability (with a mortgage balance). Courts treat the equity in the home as part of the marital estate, subject to equitable distribution. At the same time, the mortgage is a joint responsibility, meaning both spouses remain liable to the lender unless the loan is refinanced or otherwise resolved.

This dual nature makes dividing a house and mortgage more complex than dividing, say, a bank account.

Common Options for the Mortgage in Divorce

When couples divorce, there are several typical ways to handle the mortgage. Each has advantages and drawbacks:

1. Sell the House

The most straightforward solution is to sell the marital home, pay off the mortgage, and divide the remaining equity. This option allows both spouses to start fresh financially, but it may be emotionally difficult if children are still living at home or if one spouse has strong ties to the property.

2. Refinance in One Spouse’s Name

If one spouse wants to keep the home, they may refinance the mortgage in their own name. This releases the other spouse from liability to the lender. Refinancing also provides an opportunity to buy out the other spouse’s equity share. The challenge here is that the spouse keeping the home must qualify for the loan on their own income and credit.

3. Maintain Joint Ownership Temporarily

Sometimes divorcing spouses agree to keep the home in both names for a period of time—for example, until the children graduate from high school. They may agree on how the mortgage will be paid during that period. While this can preserve stability for the family, it also means both parties remain financially tied, and disagreements over payments or upkeep can arise.

4. Assumption of Mortgage

In limited cases, one spouse may be able to assume the existing mortgage from the lender, effectively transferring the loan into their sole name without refinancing. However, not all lenders allow this, and the assuming spouse must meet strict financial requirements.

Risks of Staying on a Joint Mortgage After Divorce

Even if a divorce judgment states that one spouse is responsible for paying the mortgage, the lender does not have to honor that arrangement. If payments are missed, both spouses’ credit scores can suffer, and both may be pursued for the debt.

This is why attorneys often stress the importance of refinancing or selling the home rather than leaving both spouses on the loan. Without taking one spouse off the mortgage, there is no true financial separation.

Determining Equity and Buyout Amounts

If one spouse wishes to keep the home, the court or the parties must calculate the equity—the market value of the home minus the outstanding mortgage balance. The spouse keeping the home typically pays the other spouse half of the equity value, though adjustments may be made based on other marital assets or debts.

An appraisal is often required to establish fair market value. Disputes may arise if one spouse believes the property is worth significantly more or less than the appraised amount.

Impact of Alimony and Child Support on Mortgage Decisions

Support obligations can play a major role in mortgage outcomes. For instance, a spouse receiving alimony or child support may be able to use that income to qualify for a refinance. Conversely, a spouse paying support may find it harder to meet a lender’s debt-to-income requirements.

Judges also consider whether it is in the children’s best interests for one parent to remain in the home. While this does not override financial realities, it can influence decisions about temporary joint ownership or possession.

Protecting Yourself During the Divorce Process

If you are going through a divorce in New Jersey, it is essential to:

• Get a professional appraisal of your home’s value
• Understand your mortgage terms and payoff balance
• Consider whether you can realistically afford to keep the house on your own
• Work with your attorney to ensure any agreement about the home is clear and enforceable

Failing to address the mortgage properly can leave you vulnerable to financial risks long after the divorce is finalized.

Contact Union Divorce Attorney John B. D’Alessandro

What happens to the mortgage in divorce is one of the most important financial questions you will face. Whether the solution is selling the home, refinancing, or reaching a temporary agreement, it is crucial to fully understand both the benefits and the risks.

At the Law Offices of John B. D’Alessandro, we help clients in Union, Essex, and Middlesex counties navigate the complex issues of dividing property and debt in divorce. We work to protect your financial future while reaching fair and practical solutions regarding your home and mortgage. Contact us today to discuss your needs and goals regarding the marital property in your divorce.