What Happens to the Mortgage After a Divorce?

It's best to sell a home before the divorce is final to avoid future fights over it.

Knowing the options for dealing with a mortgage following a divorce is crucial for smart financial planning. There are several possibilities and the smartest choice will depend on personal preference and on the situation of the specific couple.

Selling the House

Selling the house is the easiest choice for many because it avoids potential complications. The sale of the home can pay off the mortgage and the two parties can split any remaining money between them.

Keep the Original Mortgage

One spouse can keep the home and continue handling the joint mortgage. A potential problem with this option is that the spouse who has moved out is still liable and his credit score is still on the line if his former spouse defaults on the loan. Some couples create a system in which they keep in touch about the mortgage and pay it together.

Refinancing

One party can sign a quit claim deed and the other can buy their ex's share and refinance the loan in her name exclusively.

Assuming the Mortgage

Not all lenders allow the option of assuming the mortgage, which is similar to the refinancing option. The main difference is that the mortgage is changed to one person's name but is not refinanced, as in the other option. The lender needs proof of ability to pay the existing mortgage on the basis of the assuming party's salary.

References

• Woman's Divorce: "Understanding Your Divorce Mortgage Options"