Breaking up is harder to do
Downturn in housing market impacts divorce
The downturn in the housing market is impacting the ability of some to divorce. Quite frankly, they can not afford to divorce given they owe more on their home than it is worth. In an article out of California, the impact of the housing downturn is amplified. While housing prices were up, it was easier to split the couple's assets with the home usually being the largest asset. As one person quoted in the article said, "the hardest thing was picking a Realtor." But with the downturn in housing prices, it is more difficult. Even if one spouse wants to stay in the home, they must be able to afford the house payment as well as pay off the other spouse for their share of the equity (although that is diminishing as prices slide).
More troubling is when one spouse wants to sell and the other does not. This puts the courts in the position of deciding whether to order a sale or wait in hopes the real estate market will rebound. As the article points out, these economic times raise many issues when homeowners divorce.
1. Who gets to live in the home during the divorce and after?
2. Who pays the mortgage?
3. Does paying the mortgage increase the equity for the person paying the mortgage?
4. Who get to take the mortgage interest deduction?
5. Who is responsible for major repairs on the home which arise during the pendency of the divorce?
It must be reiterated that a divorce decree or order from a court dividing an asset does not change the relationship with the institution holding the mortgage. If your name is on the mortgage, you are responsible for paying the mortgage until your spouse or soon to be ex-spouse refinances the home and has your name taken off the debt. Your credit will be impacted if payments are not made and you could be looking at the mortgage company coming after you for payment. See my previous post on this issue.
While most of these issues can be resolved during the divorce, it becomes more difficult when the housing market is down, mortgage payments are up, and the household income is down due to a divorce. That is why it is important to ensure you are represented during a divorce to ensure your rights are protected.
