What Happens If You Default on a Mortgage During Divorce?

"Divorce is the one human tragedy that reduces everything to cash." — Rita Mae Brown.

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Few situations bring this quote to life more than when you're splitting a house in a divorce. Divorce is tough. It's emotionally draining, and when your finances are tied up in a home mortgage, things get even more complicated. As you’re dealing with a marriage breaking apart, the last thing you want is to fall behind on mortgage payments. But, what happens if you default on your mortgage during a divorce? The financial fallout can be huge, affecting everything from your credit score to how you divide property.

Let’s break it down: What happens to a house in a divorce, especially if you default on the mortgage?

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What Happens to a House in a Divorce?

When a couple decides to split, one of the biggest assets on the table is usually the family home, known legally in Ontario as the matrimonial home. Unlike other assets, which may get divided based on who purchased them or how much was contributed, the matrimonial home is treated differently. It doesn’t matter who bought the home or even if it was property owned before marriage—both spouses typically have equal rights to it.

But things get tricky fast if mortgage payments are missed during the divorce process. In the worst-case scenario, a foreclosure could be looming, which means not only losing the home but potentially wiping out any equity you might have been hoping to split. That’s why knowing the financial and legal consequences of mortgage default during divorce is so important.

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The Domino Effect of a Mortgage Default

So, what happens if you default on your mortgage? Missing a single payment can quickly snowball into a much bigger problem. At first, it might feel like a small hiccup—maybe you missed the due date, or funds were tight that month. But that’s only the start. After a missed payment, the penalties kick in: interest piles up, and the bank starts issuing warnings. After a few months of missed payments, you could be looking at foreclosure.

Foreclosure is a worst-case scenario. If the bank forecloses, they take the home and sell it to recover the debt. And often, the home sells for less than it’s worth, leaving you with little or no equity to split.

Here’s a harsh truth: When a mortgage is in default during divorce, splitting house equity in divorce can become a nightmare. You might have started the process thinking you'd walk away with a significant payout from the sale of the house. But if foreclosure happens, that equity may disappear.
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Financial Consequences of Defaulting on a Mortgage During Divorce

1. Credit Damage
   This hits hard. A mortgage default can drop your credit score by 100 points or more. Both you and your spouse are liable if both names are on the mortgage. Even if one spouse moves out and assumes the other will take care of the payments, if the mortgage goes unpaid, both of you see your credit scores take a nosedive. The impact? Securing new housing, car loans, or even credit cards post-divorce becomes much harder.
2. Foreclosure Risks
   Foreclosure isn’t immediate, but it’s a ticking clock. Once the process begins, the home could be sold off by the lender. And here's the kicker: if the sale doesn’t cover the full mortgage amount, both you and your spouse may still be responsible for the remaining debt. This is something no one expects to deal with during a divorce—being stuck with a house debt long after the home is gone.
3. Loss of Equity
   Many divorcing couples hope to split the equity in their home to help start their post-marriage lives. But mortgage default changes that equation. As interest and penalties stack up, the equity you once had can quickly shrink. By the time the house is sold (or foreclosed), there may be little to divide.
4. Debts After Foreclosure
   If the house is sold for less than what’s owed, you and your spouse may have to split that debt, adding to the overall financial burden of the divorce. This is especially painful if the goal was to sell the house, split the proceeds, and move on with your lives.

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Can You Keep a Joint Mortgage After Divorce?

Here’s where things get tricky: Can you keep a joint mortgage after divorce? Technically, yes, but it’s not always advisable. If both you and your spouse are on the mortgage, you're both legally responsible for payments—even if one of you moves out. If one spouse stops contributing, the other spouse will be left paying for a house they may no longer live in. Not ideal.

A better option? Refinancing. Refinancing allows one spouse to take full ownership of the mortgage, removing the other’s name and releasing them from future liability. This works if the spouse who keeps the house can qualify for a mortgage on their own—based on income, credit score, and other factors.

But beware: refinancing can be tough, especially if divorce has already strained your finances. Many spouses find themselves unable to qualify for the loan on their own, leaving them stuck with a joint mortgage that neither wants to carry.

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Divorce and Property Owned Before Marriage

You might think that if you owned the home before the marriage, you’re in the clear. Not quite. In Ontario, the matrimonial home is treated differently than other assets. Even if you owned the home outright before you got married, you could still be required to split the equity with your spouse. The rules around divorce and property owned before marriage get more complicated when there’s a mortgage involved—especially if you’re facing default.

If the house was bought before the marriage but became the family home, its value at the time of the divorce is still subject to equal division. Any increase in value during the marriage, or any equity built up, becomes fair game. And if you’ve defaulted on the mortgage, that value could be dwindling fast.

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Practical Steps to Avoid Mortgage Default During Divorce

So, what can you do if you’re in the middle of a divorce and struggling to keep up with mortgage payments? Here are some actionable strategies:

1. Sell the Home
   One of the best options to avoid mortgage default during divorce is to sell the home and divide the proceeds. If you’ve built up significant equity in the home, selling it can provide both parties with a clean break and prevent foreclosure. Selling sooner rather than later can help preserve that equity and prevent financial disaster.
2. Refinancing
   If one spouse wants to keep the home, refinancing is often the next best move. Refinancing can remove one spouse’s name from the mortgage, leaving the other to take full ownership of the property. It’s a great option if the remaining spouse can afford the payments on their own.
3. Divorce Loans
   Divorce loans are a short-term financial solution to help cover mortgage payments and legal costs during the divorce. These loans can give you some breathing room while you sort out your finances. However, they’re not without risk. You’ll need to make sure you can pay the loan back after the divorce is finalized, or you risk adding to your financial stress.
4. Temporary Financial Relief from the Lender
   Many lenders offer temporary relief options like payment deferrals or loan modifications. If your financial situation has changed drastically due to the divorce, reach out to your lender and explain the situation. Being proactive can buy you time to get your finances in order and avoid default.

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Final Thoughts

Defaulting on a mortgage during a divorce can have devastating financial consequences. It affects your credit, your ability to split the house’s equity, and can leave both spouses buried under debt long after the divorce is finalized. But it’s not inevitable. By understanding the risks and taking proactive steps—whether that’s selling the home, refinancing, or seeking temporary relief—you can protect your financial future.

Divorce is complicated enough. Don’t let mortgage default make it worse. Take action early, communicate openly, and seek professional advice if needed. Your financial well-being depends on it.