Home values are high in Colorado, and if you and your spouse are moving toward a divorce, you may wonder what happens to your existing mortgage. The options you have in this area depend on how much you still owe and the value of your home, among other variables. It also depends on whether either of you want to stay in your home.
According to Bankrate, one of the first things to do in this scenario is to figure out how much equity you have in your home. While selling your home should give you this figure, you should also be able to get a sense of how much equity you have through an appraisal. Then, you need to consider your wants and those of your spouse to determine how to move forward.
If one of you wants to stay in the home
If you or your ex wants to keep the home and the other does not object, the party who wants to stay has the option of refinancing the mortgage to exclude the other party’s name. The party wishing to stay must be able to qualify for a new mortgage alone. Then, the other party gets a cash-out settlement.
If neither of you wants to stay
If both you and your ex agree to vacate the home, or if neither of you qualifies for a mortgage on your own, you may have to sell it. This allows you to pay off the old mortgage and each pocket any profits you make after doing so.
Selling your home or buying out your ex’s share of the mortgage may have tax implications. Make sure you understand what these implications are before making any final decisions.