In this crazy housing market with rising interest rates, many divorcing homeowners are wanting to know if they can assume the existing mortgage on the marital home. In doing so, they are looking to avoid having to refinance it into a higher interest rate and keep the current mortgage terms and great rate. Sounds enticing and easy right?
Well…. Unfortunately, it’s not that simple and not all loans are assumable. Additionally, the lender will still require that the assuming party (the person keeping the house) fully qualifies for the loan on their own with their own credit, income and debts (which may change after a divorce).
A property owner can transfer their ownership of their real property to another using a Quitclaim or Warranty Deed, BUT both parties will still remain as co-mortgagees on the note (both named on and liable for the Mortgage loan). So, it’s risky having the person not keeping the house remain jointly liable on the Mortgage loan while having their name removed from the ownership. Although we hope this never happens, if your soon to be ex-spouse stops making the mortgage payments: (1) it can affect your credit and (2) the lender may come after you for a deficiency judgment to collect the debt. Additionally, if you stay named on the Mortgage after your divorce, you may not qualify for your own mortgage loan because the existing Mortgage can show up on your credit report.
So, if you are the person who will no longer have ownership of the home, you likely will want to be removed from the Mortgage loan. This can only be one by refinance, assumption, sale of the house or paying the Mortgage loan in full. While the assumption sounds like a good option when refinancing would result in a new, higher interest rate, many lenders won’t offer an assumption option and it depends on the type of loan you have.
There are many ways to get creative in structuring the decisions around the house. It’s best to consult with a Certified Divorce Lending Professional (CDLP™) early in the divorce mediation process to be sure the stage is set for successful mortgage financing in the future.
Feel free to reach out to me for a free consult and call Mara (602-714-7447) for more information on divorce Mediation.
SUZANNE SÖDERBERG CDLP, NMLS# 501875
Senior Mortgage Loan Originator
Veteran and First Responder Advocate
Certified Divorce Lending Professional™
C: 602-206-3439 | F: 833-240-5463
A: 10446 N. 74th St., #250, Scottsdale, AZ 85258