Even if a divorcing couple transfers the home title to one spouse, both may still be responsible for the mortgage if they both signed the loan agreement. This is because the mortgage is a separate contract with the lender, binding both parties to the repayment terms.
To remove one spouse from the loan, several steps can be taken:
1) Refinance the Mortgage: The spouse keeping the house can refinance the mortgage solely in their name. This involves qualifying for a new loan based on their income, credit score, and financial situation. Once approved, the original loan is paid off, and the other spouse is released from liability.
2) Assumption of Mortgage: Some lenders allow a loan assumption, where one spouse takes over the existing mortgage. This option requires lender approval and the assuming spouse must meet the lender’s criteria to qualify independently.
3) Sell the Home: Selling the property and using the proceeds to pay off the mortgage can also release both spouses from the loan obligation. Any remaining equity can be divided according to the divorce agreement.
Consulting with a mortgage professional, financial advisor, and realtor is recommended to understand the best option based on your individual circumstances.
Check out my comprehensive 50 page guide, "Navigating Divorce and Real Estate," here.
Questions about divorce and real estate? General real estate questions? Send me a message and we can chat.
To remove one spouse from the loan, several steps can be taken:
1) Refinance the Mortgage: The spouse keeping the house can refinance the mortgage solely in their name. This involves qualifying for a new loan based on their income, credit score, and financial situation. Once approved, the original loan is paid off, and the other spouse is released from liability.
2) Assumption of Mortgage: Some lenders allow a loan assumption, where one spouse takes over the existing mortgage. This option requires lender approval and the assuming spouse must meet the lender’s criteria to qualify independently.
3) Sell the Home: Selling the property and using the proceeds to pay off the mortgage can also release both spouses from the loan obligation. Any remaining equity can be divided according to the divorce agreement.
Consulting with a mortgage professional, financial advisor, and realtor is recommended to understand the best option based on your individual circumstances.
Check out my comprehensive 50 page guide, "Navigating Divorce and Real Estate," here.
Questions about divorce and real estate? General real estate questions? Send me a message and we can chat.
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