Going through a divorce can complicate obtaining or managing a mortgage, but there are specific options and strategies to address these challenges. Here’s a breakdown of mortgages for people going through a divorce and how to navigate the process.
Options for Existing Mortgages
If you already own a home with your spouse, you need to decide how to handle the existing mortgage:
A. Refinancing to Remove a Spouse: One spouse may choose to keep the home and refinance the mortgage solely in their name.
- Requirements: The spouse assuming the mortgage must qualify on their own income and credit.
- Advantages: Removes the other spouse’s responsibility for the mortgage.
- Considerations: Refinancing may increase monthly payments if interest rates are higher than the original loan
B. Selling the Home: Both spouses can sell the home and split the proceeds.
- Advantages: Eliminates the shared financial obligation and provides liquid cash to divide.
- Considerations: Market conditions, equity in the home, and agreement on how to split the proceeds are factors to address.
C. Assuming the Mortgage: If the mortgage is assumable (common with FHA or VA loans), one spouse can take over the existing loan.
- Advantages: Keeps the same loan terms.
- Considerations: Requires lender approval and financial qualification by the assuming spouse.
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