Some couples purchase a home together with a joint mortgage, only to later decide to end their relationship. The question that follows is how to manage the jointly owned home. Although the romantic relationship may have ended, the financial obligations of the mortgage remain. Whether you choose to sell the house to resolve the issue or remove one party's name from the mortgage to continue paying alone, it is essential to research, understand, and carefully check the conditions of various solutions.

Ways to Handle Joint Mortgage Issues for Separating Couples

Generally, there are three solutions for joint mortgage problems:

1. Remove the Joint Borrower's Name

The main challenge with this method is reaching an agreement on who will retain ownership of the house, as the other party must consent to the transfer of ownership. If one party refuses, the removal of the joint borrower's name cannot proceed. However, if an agreement can be reached, both parties can visit the land office to request the transfer of ownership. The remaining borrower will then be responsible for the mortgage alone. If the borrower has a poor repayment history or insufficient income, the bank may not approve the removal of the joint borrower's name due to increased risk.

2. Refinance from Joint to Individual Loan

Another option if the original bank does not approve the removal of the joint borrower's name is to refinance with a new bank for an individual loan. Generally, banks will approve individual loans but will assess whether the borrower can repay the debt. The conditions include:

  • The bank will check various information such as employment, income, source of income, debt obligations, and job stability, particularly the borrower's history of timely repayments with the original bank.
  • The bank will evaluate whether the borrower's income is sufficient to cover the monthly mortgage payments alone. If the borrower is deemed capable, the bank will approve the loan. Conversely, if the assessment shows otherwise, the bank will deny the individual loan application, even with a good repayment history with the previous bank.
  • The borrower must not have credit bureau issues. For instance, if the borrower has multiple credit cards with a total limit significantly exceeding their income, the bank may view this as excessive debt, increasing the likelihood of credit bureau issues, leading to a denial of refinancing.
  • Once the bank approves the refinancing, the joint borrower must be present to sign the consent for the transfer of the house on the refinancing mortgage date. A common issue is the inability to contact the other party, or the joint borrower may have conditions for signing.

3. Sell the Property

If both parties no longer want the house, selling it is a straightforward way to close the joint mortgage and resolve the issue without either party having to continue making mortgage payments. Steps to prepare for selling the house include:

  • Prepare the house for sale by ensuring it is in good condition and checking for necessary repairs, improvements, and cleaning. The house should be move-in ready, as most buyers prefer a property in excellent condition.
  • Review various costs to determine the selling price, such as transfer fees. It is essential to check the expenses that will arise during the sale process to set a fair price and avoid losses. If you are unaware of the costs and set the price too low, you may sell the house quickly but lose potential income. Conversely, setting the price too high may make it difficult to sell, so it is crucial to price it appropriately considering the incurred costs.
  • List the house with a reputable website to facilitate a quick sale. Choose a website that is user-friendly and easy to navigate, with clear categories for searching, such as property type, location, and price, covering various property types like houses, townhomes, and condos.

After successfully selling the house, the profit share must be assessed based on whether the house was acquired before or after the marriage registration. If the house was owned before marriage, the profit from the sale belongs to the owner. However, if the house was purchased together after marriage registration, it is considered marital property, and the profit from the sale will be split equally.

All the above are solutions for couples who purchased a home together but have separated. Whether they are married or not is irrelevant; what matters is finding a resolution for the joint mortgage. Although continuing to pay alone, whether through refinancing or not, may seem like a comfortable option, it is essential to ensure that one can manage the payments. Choosing to sell the house is also a good solution that resolves the joint mortgage issue without creating further financial burdens. If the borrower opts for this latter solution, they can proceed to list the house for sale.