What Happens to the Mortgage When You Get a Divorce in North Carolina?

According to provisional data from the CDC, the crude divorce rate in North Carolina was 2.7 per 1,000 residents in the year 2023. While this figure has declined alongside national rates over the past decade, our state-wide divorce rate is still higher than the current national figure of 2.4 per 1,000 people. With so many couples marrying, separating and divorcing in North Carolina from year to year, it’s no surprise so many clients have questions about how their mortgage gets dealt with during the divorce process.

Most divorces are complicated from the get-go, and property ownership only compounds those complications. For many couples and individuals, a home is their single-largest asset, and its value can be one of the most significant variables to contend with before, during and after a divorce. Here’s a quick explanation of how your mortgage could come into play during a divorce and an overview of how an experienced divorce lawyer can help you advocate for your rights when it’s time to divide your assets.

Who pays the mortgage during a divorce?

North Carolina is unique when it comes to the divorce process because our state requires couples to have been separated for at least one year before anyone is legally permitted to file for an absolute divorce. In practice, that looks like living in separate residences for over a year with the intent to remain separated.

In light of this requirement, couples may find themselves struggling to decide who should stay in their shared home and who should relocate during the separation period. What’s more, if one partner chooses to move out of the home they shared with their spouse, there may be questions and confusion surrounding whether or not the relocated partner should go on paying their share of the mortgage.

While physical separation is a critical component of the North Carolina divorce process, that doesn’t give anyone permission to move out and abandon their shared financial obligations without an actual agreement in place. If both spouses’ names are on the mortgage, they’re both legally responsible for the loan – regardless of whether or not they are living separately or working towards a divorce.

What happens if one spouse stops paying the mortgage?

During a separation period, it’s important for soon-to-be-exes to be on the same page about how they’ll handle shared financial obligations, including the mortgage. In the absence of some sort of up-front agreement, disputes over who should pay the mortgage can balloon into more serious and complicated legal challenges. If both spouses are named on the loan and one or both of them fail to pay their share of the mortgage, they could each find their credit affected and may even put themselves at risk of foreclosure.

Remember: your lender doesn’t really care about your marital status. All they care about is receiving the funds they are owed on time and on a consistent basis. In many cases, this means both parties could face consequences from their lender even if a separation agreement indicates one spouse will take on the mortgage payments during the separation period. While a spouse who violates a separation agreement in this manner could face legal consequences, the financial consequences of missed or late mortgage payments could still impact both spouses named on the mortgage agreement.

This is why it’s so important to come up with a plan for the mortgage during their separation period and ensure there are mechanisms in place for enforcing that agreement. A poorly-negotiated deal during separation could lead to long-term legal and financial problems and seriously complicate future discussions about the division of marital assets.

How does North Carolina divide marital assets?

While separation agreements and court orders can clarify each party’s financial obligations during the state’s mandated separation period, decisions about who keeps what can get a little more complicated when it’s time to finalize a divorce. North Carolina is an equitable distribution state, which means the court will divide marital property and marital debt based on what is considered fair rather than what is technically “equal.”

While these determinations may start with the underlying assumption that a 50/50 split is fair, the court will ultimately take a variety of different factors into account to adjust the split accordingly. These factors may include things like income, earning potential, marital contributions and future financial needs, among other things. After adjusting for all of these considerations, the court will make a determination about what portion of the marital assets each spouse should retain.

Keep in mind that this approach to equitable distribution applies specifically to marital property, or assets acquired during a marriage. If one spouse owned the home in question prior to marriage, division discussions may become a bit more nuanced. While on paper the home might be considered separately owned, the court may consider whether any increase in the home’s value during the marriage is attributable to marital efforts or contributions.

An experienced divorce attorney can help clients better understand the most likely classification of a shared marital home based on its technical ownership and other factors. Small details matter in these determinations, so it’s always best to work with a professional who knows what the courts are looking for and how to fight for a truly equitable asset division.

What happens to the house?

Unfortunately, there is no one-size-fits-all answer to this question. Sometimes, couples will submit their own requests for property division based on their own collaborative efforts. These division agreements may specifically dictate who should keep the house or what should be done with the proceeds from a mutually-sanctioned sale. The court may approve such a request if they feel it is reasonable, but they may refuse to enforce an agreement affected by fraud, coercion or unconscionability.

Ultimately, the house will be handled in accordance with the final order. Sometimes this requires that the home be sold and its proceeds divided in accordance with a specified split. Other times, it may allow one spouse to essentially “buy out” their ex via cash or other marital assets. If one spouse keeps the home, they will likely need to refinance it to remove their ex’s name from the mortgage. If refinancing isn’t possible for some reason, the spouse who intended to keep the home may still wind up needing to sell.

As with all asset division determinations, the court will consider multiple factors in order to decide the best course of action for dealing with a shared home. Sometimes child custody and parenting plans play a role in these decisions, but several other variables can influence the final division as well.

Final thoughts

Just because North Carolina law requires divorcing spouses to live in separate homes prior to filing for divorce, that doesn’t mean one spouse can walk out on their mortgage obligations without consequence. Even if the long-term plan is to sell the home, it’s important for divorcing spouses to honor their legal obligations throughout the entirety of the separation and divorce process.

At Epperson Law Group, PLLC, we understand how complicated divorce-related financial decisions can be – even without the idiosyncrasies of North Carolina’s divorce laws in play. If you are currently separated or considering filing for divorce, it’s important to get proactive about how you and your ex will handle the mortgage payments to avoid compromising your financial future. To learn more about how North Carolina’s asset division approach could play out in your divorce case, give us a call or fill out our online contact form to schedule a free consultation with a member of our team.