Home Loans and Support

Mortgage Options While Going Through a Divorce

Going through a divorce can be a traumatic time for anyone. Although the love may have faded away and you want to part ways, the home you’ve acquired while married can turn into a major obstacle for both parties.

Despite the fact the divorce decree states that your ex will take care of the property and mortgage payments, it’s crucial that you realize this will not remove your liability from the loan obligation. When you signed the loan documents, you mutually agreed to repay the loan until the debt has been satisfied. Before the housing market collapsed in 2008, divorcing couples had no problems selling their property, splitting the equity and parting ways. But times have definitely changed..

Generally, mortgage debt is the largest investment a divorcing couple has to split – and divorcing a mortgage isn’t as simple as one may think.

To remove one spouses liability from the mortgage, the property will either need to be sold, refinanced or assumed. One can always choose to keep themselves on the mortgage, but this is a risky position if the other spouse happens to default on the loan. We’ve come across thousands of homeowners in this situation here in our forum, and below we’ll help you understand your options during these strenuous times.

Quitclaim Deed or Interspousal Transfer Grant Deed

A quitclaim deed is a document that transfers any interest an individual has in a property to another. They can be utilized to transfer interest from one spouse to another, but it does not eliminate the liability for the associated debt. If your name is attached to the loan and you quitclaim your interest to the remaining spouse, don’t be surprised if the lender comes after you for a missed payment, or even worse – foreclosure.

Interspousal transfer grant deeds are also sometimes used in a divorce situation. This makes it simple to transfer interest from one spouse to another and also to change community property into separate property. The process is similar to that of a quit claim deed. You’ll need to sign these together with a notary and it’s always wise to consult with an attorney to make sure it’s filled out accordingly.

Sell the Property

Generally, the easiest and most effective way to get both names off the mortgage and to remove liability from the debt is to sell the home. The sale can pay off the existing mortgage, and any left over proceeds can be split between both parties. It may be more convenient to try to sell the property before the divorce is complete to help avoid any future problems over the sales price. Additionally, this benefits both parties as you’ll not have to worry about the other spouse managing the monthly payments, maintaining the household, or paying property taxes and insurance.

But since the housing crash, selling the home is easier said than done – especially when you are underwater (i.e. owe more on the mortgage(s) than the home is worth). Underwater homeowners are forced to either come up with the difference between the home value and loan amounts, or pursue a short sale. Be advised that with any short sale, your credit score will be negatively affected and you both may still be liable for the difference the lender has forgiven – unless the lender has agreed (in writing or by law) to waive their rights to the deficiency.

Refinance the Mortgage

Having one spouse refinance the mortgage into their name only is another very effective way to remove one’s liability from the mortgage. This can be a simply fix – as long as:

1. There is sufficient equity to qualify for a refinance. Keep in mind that there is currently one refinance program available for underwater homeowners. That is the Home Affordable Refinance Program (HARP), for this program your mortgage must be owned by either Fannie Mae or Freddie Mac.
2. The remaining spouse is financially stable and has the income and credit to secure a loan.
3. Both spouse mutually agree to the transaction and allow one party to remain in the home.

Typically, the spouse that wants to keep the property will pay off the other spouse’s equity share while refinancing the loan into solely their name. It’s suggested to include a quit claim deed to extinguish any rights the other party has to the home. It’s crucial that you make sure the home is only refinanced into one spouses name. This will ensure that the spouse who did not keep the home is safe in the event of a default or foreclosure on the property.

If the divorce has not yet been finalized and you’ve already decided who will be keeping the property, it’s a good idea to include in your divorce decree who will be refinancing the loan. This way you can prove that both parties have come to an agreement as to who will be taking over the home and mortgage payments.

Before considering taking over the home yourself and becoming fully responsible – ask yourself: Can you truly afford to keep the home and would you like to continue living there once you have moved on? Homes consist of memories and times shared with love ones, this can make it that much more difficult to move on with your life. Think of it this way, would you consider buying this home if you were single and out browsing for a place to live?

Mortgage Assumption

A mortgage assumption is one option that is not brought up all that often. Why? Because they are very rare these days. Another main reason why is because not all mortgages are assumable, and even if they are, many mortgage lenders tend to be hesitant to do so. Therefore, your only way to find out is to call your servicer and see if this is a viable option.

If the mortgage lender will allow one party to assume the loan, you’ll begin the process by completing an assumption agreement and a release of liability. The bank will also require your financial documentation to determine whether or not the mortgage can be handled based off one borrower’s income. If you do meet the requirements, you may also have to provide a copy of your divorce decree and quit claim deed. If the assumption is approved, one spouse will receive a release from liability.

For homeowners going through a divorce, an assumption may be a good option to explore (if your loan allows you to do so). While there may be a few small fees associated with an assumption, they are usually much less than the fees that will come along with a refinance.

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About Moe Bedard

My name is Maurice Bedard, but most people call me Moe. I am the founder of America's #1 Mortgage Forum, LoanSafe.org, and also a website design firm called We Create Web Designs. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications. I currently live in Carlsbad, California with my beautiful wife and children.

29 Responses to Mortgage Options While Going Through a Divorce

  1. Lg says:

    I purchased a home in December with my mother as a co-signer. (my mother does not live with me). In February I re-financed the 1st mortgage to remove my mother’s name. She is still on the deed of the house. How do I get her name off the deed?

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  2. Nicholas Boehner says:

    Does an Interspousal Transfer Grant Deed remove my ex from the loan obligations, or is refinancing/assumption of loans the only way that she can be removed from the loan obligations.

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  3. melissa says:

    my husband left me 4 months ago, the house is in his name and will not give my permission to speak to the mortage company to make arrangements to catch the house payment up. I want the house he dose not care and told he will let it go. What law will help me get the house?

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  4. Rylanda Martin says:

    I was award our family home but my husband did not sign the deed over to me but the divorce decree states I was awared the home. I did a quick claim deed to my parents. My question is can I still sell the house even though I never had a deed in my name. The Loan in currently in my name. The deeds are in my Parents name with me responsible for the loan. Please advise.

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  5. Susan1 says:

    My divorce decree states that my ex would not be liable for the mortgage debt having both our names on it, but I read that a mortgage contract keeps him liable for the debt if the mortgage for some reason can’t be paid by me. A loan is a contract between lender and borrower, but a divorce decree doesn’t take precedence over a loan contract – so they say.

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  6. TJ says:

    Lg,

    You should have a Quit Claim Deed done running from your mother to yourself and get her to sign it over to you.

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  7. TJ says:

    Susan1,

    I do believe that’s true that the mortgage takes precedence. But it is not common for a divorce decree to not require some form of satisfying /assuming or refinancing the mortgage by one of the parties. The most common disposition is the person who was awarded the property in the divorce assumes the liability by refinancing to take the other spouse off the mortgage.

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  8. kyle says:

    My spouse and I will be divorcing but neither of us has filed yet. To minimize a lot of upcoming expenses, we need to refinance the house. My spouse’s attorney wants her to wait to file for divorce until the loan has been approved, but to not disclaim the upcoming divorce on the loan documents or we’d be tied up in red tape. Is this permissible given the circumstances? Seems like fraud but I do not yet have legal representation.

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  9. Kathy says:

    I am going through a divorce and want to try to apply for a loan mod so I can keep the house. My husband does not want to quit claim the home over because it will not take him off the loan. I am unable to refinance. Are there any options for me to keep it?

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  10. Evan Bedard says:

    Hello Kathy,

    Unfortunately, there are not many options to remove a borrower from a mortgage after going through divorce if you owe more on your mortgage(s) than the property is worth. I do not understand why people would not agree to sign a quit claim deed in this situation when it’s in the best interest of both parties. There’s nothing either of you may be able to do to remove him from the mortgage at this time, but is he agrees to sign a quit claim deed and you are able to achieve a loan modification you can both avoid having a short sale or foreclosure hit your credit report.

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  11. kathy pomales says:

    went thru a divorce. found out ex changed the name on the mortgage to his fathers name his brother was a witness signature. This was not legal he paid an outsider to do it. It was a paralegal/notary that his father knew. This was done during the divorce. He did one day say to me when I confronted him, he said I did what I had to do because I was not getting the house. (I didnt want it) He commited fraud?? Docs show. My divorce was really simple only cost me 3000.00 His was around 25,000 or so (i have heard) What do u think???

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  12. Evan Bedard says:

    Hello Kathy,

    It sounds like there was fraud committed during this transaction. If you were a co-borrower on the mortgage they would need approval from you to remove your name from the account. However, if you were no longer interested in the property isn’t this a good sign for you? In today’s market and with countless homeowners I’ve spoken to, it’s extremely difficult to get out of a mortgage in this type of situation.. I’m just trying to get a better picture of what happened and what’s ultimately your goal here?

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  13. Robert Martin says:

    Attorney negligence left me holding the bag when my ex defaulted on the condo she took in ED. Attorney’s never made any provision for transferring the mortgage. She defaults 5 years later, bank says I’m still on the hook for $100,000. Attorney never told me the bank didn’t have to honor the judge’s decree (how is a layman to know that? It’s apparently a principle developed only in case law, which only a lawyer would know). A QCD takes away any right to the property,such that you can’t even step in to protect yourself if the ex defaults. Beware sloppy lawyers using QCD’s. You’ll get screwed eventually.

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  14. Evan Bedard says:

    Hello Robert, unfortunately the attorney/judge holds no control on releasing your entire liability from the mortgage loan. A quit claim deed will allow you to give up your interest in the property, but the only way to remove your name from the actual loan is through a refinance, assumption or to sell the property – which are ALL very difficult to accomplish in today’s market..

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  15. John says:

    My ex is still on the loan docs and I am starting the Deed in Lieu process. My attorney said that she may be able to reopen our divorce. What does that mean?

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  16. Evan Bedard says:

    Hello John,

    That’s a good question, reopen the divorce? Your attorney did not explain what that would consist of? I take it you were awarded the property through the divorce?

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  17. Jessica says:

    Can a harp loan be assumable in divorce between husband and wife. It’s only in his name now and wife wants to assume it. Thx

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  18. Evan Bedard says:

    Hello Jessica,

    Are you referring to removing a spouse from the loan through a HARP refi? If so, yes it’s possible to remove a co-borrower from a mortgage through any type of refi.

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  19. Pam says:

    I purchased our home before we were married. After we married, I did a quitclaim deed to add my husband. We are now divorcing, but he is refusing to commit to anything in terms of what to do with our home. Do I have any options since I am the only one on the loan?

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  20. Evan Bedard says:

    Hello Pam,

    Are you planning on keeping the property yourself or transferring it solely in his name?

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  21. Pam says:

    Evan Bedard,

    My plan is to keep it, but he is refusing to leave the property. If I keep the house, I will need to refinance it. He is refusing to agree to anything to drag this out. I was just looking for any options I may ave since my name is only on the loan.

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  22. Jo-elle says:

    My husband and I are getting a divorce.
    I bought our home a month after we were married. My name is the only name on the loan and the deed. We have only been in the home for 3-years and there is no equity in the home at this time. My x-husband wants me to sell the home and split the profit however it will be a loss and I am sure he will not, nor can he afford to help me pay the loss that I will incur if I sell the home. Unlike him I can afford to stay in the home.
    He has nothing to lose and he is just doing this to cause me to have a headache.
    His credit score is at least 150 points below mine and I am sure it is dropping as I type, being that he has no self control when it comes to money.

      (Quote)  (Reply)

  23. Evan Bedard says:

    Hello Jo-elle,

    This is your property and he cannot force you to do anything. I’m sure at the divorce hearing you’ll be able to negotiate (and he’ll have to agree) that you maintain full ownership. You’ll need to speak with your attorney, but he obviously doesn’t have the income nor has a clue about real estate.. How can you sell the property and split the profits when there’s $0 equity?

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  24. Michelle says:

    I have an fha mortgage that was successfully modified with a lower interest rate and a partial claim. I now want to remove my ex husband from the loan with an assumption. I have a quit claim deed and a divorce decree. What happens to the partial claim if I assume the loan? Does it stay as is? Thanks!!

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  25. Keith says:

    mother & daughter bought a double in 07. Daughter meets future husband who influenced her to walk away from family and abandon home. She hadn’t paid on mortgage since, refuses to sign quit deed even though mother was approved for a modification last year. Now daughter wants to sell or force foreclosure out of spite and hate. How can mother force daughter by law to sign quit deed to avoid foreclosure. Lawyers seem to say selling only way. Mortgage hasn’t been paid in 6 months because bank wants paid in full and keeps rejecting payments. Thanks

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  26. Moe Bedard says:

    Unfortunately, without her consent or cooperation, you are stuck. Family is more important than a darn home or money. Work on your relationship with your daughter, and fixing that. If that is repaired, then you can fix anything else.

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  27. Gina says:

    Rylanda Martin,

    Your parents should sign a quit claim deed back to you. Then you can sell your house. This assumes your ex-husband is no longer on the deed or mortgage.

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  28. Susan says:

    My Mortgage company told me they would do a release of liability on my Harp loan in March. But, I needed to have a Divorce Decree, quick claim and Deed sent in. So, time has come to sign and I called to see how long it would take, after I got my Divorce Decree. They told me I could not do that, I had to refinance. Same company, but they changer Service Providers. We are under the water still and I do not have the funds to refinance. Cannot get another HARP loan. What options do I have? I am suppose to be keeping the property. My husband wants his name off of mortgage. We have not signed the Settlement agreement yet. This is a investment property. Can I get your future ex off of the Harp loan?

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  29. Gigi says:

    i’m going thru a divorce right now, house is underwater we agreed toput the house on sale a yr ago no payments have been made for almost 1.5yrs, now b4 judge and after dragging the divorce seetlement he wants to apply for a modification to keep the house. he works only part time making $10/hr and he wants to remove me from the deed so he can put me on the street with my 2 little kids…what are my options in this situations…i was looking to move when the house gets sold but honestly dont have the money to afford rent now.since attorneys fee ae eating all my income..Can I do the same ask him to leave the house to me so i can handle the sale or what ever need to be done?…
    please help!!!

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