Divorce and the Mortgage Dilemma: Exploring Your Options
Divorce is tough, and when you’re trying to untangle shared assets like a home, things can get even more complicated. If one spouse wants to keep the home or buy a new one, mortgage approval is often a sticking point. Unfortunately, traditional lenders don’t always say “yes,” and their strict requirements can leave people feeling stuck.
But here’s the good news: as a Certified Divorce Real Estate Expert (CDRE) working in Colorado, I’ve helped countless couples explore alternatives to traditional mortgage financing. If the banks have turned you down, there are still options to consider that can help you move forward while keeping your financial goals in sight.
1. Owner Financing
Owner financing, also called seller financing, is when the seller of a property acts as the lender. Instead of going through a traditional bank, the buyer makes monthly payments directly to the seller.
For divorcing couples, this can work if one party is keeping the home and the other is willing to act as the “seller.” The terms—such as interest rates and payment schedules—can be negotiated between the two parties, which adds flexibility.
While this arrangement avoids bank involvement, it does require a high level of trust and a well-drafted agreement. It’s essential to involve a lawyer or mediator to ensure the terms are clear and fair to both parties.
2. Co-Borrowing with Family
If qualifying for a mortgage on your own isn’t possible, co-borrowing with a family member might be a temporary solution. A trusted family member could help you secure financing by co-signing or co-borrowing.
This strategy can allow you to stay in the home or purchase a new one while you work on strengthening your financial position. However, it’s important to consider the potential risks to the co-borrower, including their credit and liability for the loan. Be sure to have an honest conversation and put agreements in writing.
3. Renting (for Now)
While it may not feel ideal, renting can be a smart transitional option. If buying a home right away isn’t feasible, renting gives you time to rebuild your credit, save for a down payment, or explore creative financing options.
For clients in Colorado, renting can also allow you to stay in the same school district or neighborhood, which can be especially important if children are involved. Think of it as hitting “pause” rather than “stop” on your homeownership plans.
4. Shared Equity Agreements
Shared equity agreements are a less common but increasingly popular option. In this scenario, a third party, such as a company or investor, helps you buy the home in exchange for a percentage of the future equity.
This can be a useful tool for someone who doesn’t qualify for a mortgage but wants to stay in the home or purchase a new one. Just be sure to read the fine print and understand the long-term implications.
5. Downsizing or Selling
Sometimes, the best option is to let go of the marital home and consider a more affordable property. Downsizing can free up equity and reduce monthly expenses, giving both parties a fresh start without the financial strain of maintaining a large property.
As a CDRE, I often help clients navigate the emotional and financial aspects of selling during a divorce. My goal is to make the process as smooth as possible while helping both parties achieve fair outcomes.
Let’s Find a Solution That Works for You
The path to resolving real estate issues in a divorce isn’t always straightforward, but it doesn’t have to feel impossible either. Traditional lenders may say “no,” but there are creative options that can help you move forward.
As your Certified Divorce Real Estate Expert in Colorado, I specialize in finding practical solutions that balance financial realities with the emotional complexities of divorce. If you’re feeling stuck, let’s explore these alternatives together and find the right fit for your situation.
Ready to take the next step? Reach out today for expert guidance tailored to your needs.
