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What do you do with a mortgaged home when you divorce?

When Texas couples divorce, the largest item they are likely to have to deal with is their home. For most of us, that means a residence on which we have a substantial mortgage. One mortgage planner advises divorcing couples who have a home to "[s]ell it, pay off the mortgage and move on."

The decision about what to do with the family home depends on a number of factors. If you owe more on the home than it is worth, you may decide on a short sale or to pay off the difference between the amount left on the mortgage and what the property is worth. A short sale, or selling your home for less money than you owe on the mortgage, can impact both spouses' credit.

Couples need to determine whether they should refinance the mortgage under one person's name, keep both of their names on the mortgage or sell the home. If the two of you agree to sell the home and you can do so without losing money, that can be a good deal. However, that is not always what couples choose to do.

In some cases, one spouse wants to keep the home and has good enough credit to qualify to refinance it under his or her name only. That may be the best decision, provided that the other spouse agrees to let the home go.

If neither spouse can qualify to refinance the mortgage on his or her own, which is often the case, the best decision may be to sell the home. As the mortgage planner notes, both spouses should ask themselves if they would buy the home if they were single.

What to do with the family residence should be a part of all divorce negotiations. Your Texas family law attorney may be able to advise you and refer you to a real estate professional to determine the best way to handle the home. This can be emotional issue, particularly if you have children who have grown up in the home. However, you also have to look at it from a financial perspective.

Source: Bankrate, "Breaking up the mortgage after divorce" Polyana da Costa, accessed Mar. 09, 2015

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