There can be so many issues and problems you must face and resolve during a divorce, and one common one many couples face is their underwater mortgage. Having an underwater mortgage means that you owe more on the house than its current worth, and you and your spouse might be interested in exploring the options you have if this is the state of your jointly owned home.
How a mortgage becomes underwater
When the balance of your mortgage exceeds the amount your home is worth, it puts you in a really bad place. After all, if you sell the house for its current value, you would have to bring a check with you to pay the difference, and this is not something most people want to do. A mortgage can become underwater for a number of reasons, including the following:
- You paid too much for the house and housing prices fell.
- You borrowed more than the house cost.
- You took out home equity loans on the house.
These are some of the ways a mortgage becomes underwater. If you are going through a divorce and have a house and loan in this state, you will have to determine the best way to handle what you decide to do with this home.
The options you have in divorce
One of the ways you could handle this is to let one spouse keep the house. If you really want to stay in the house or if your spouse is willing to, then one of you could just keep the house and continue making payments on it. At some point in time, you will regain a better financial picture with the house and will no longer be underwater with it.
A second option is to sell the house through a short sale. This option will require lender approval, and it will allow you to sell the house for less than you owe. There are consequences of selling in this manner, but it is often the best option when you really want to just get rid of a house you own that has an underwater mortgage.
Making a decision about what you will do with your house will be a necessary step if you are getting divorced. If you have questions about any of the methods listed here, or if you would like to learn more about these options, contact a divorce lawyer like those at Scott & Scott, PC.