Divorce brings emotional and financial challenges—and figuring out what happens to your home and mortgage is one of the biggest.
At Contour Mortgage, we’ve helped thousands of clients navigate divorce mortgage solutions since 1993. In this guide, we answer the most common questions we hear from people navigating home financing after divorce so you can make informed decisions with confidence.
Quick Answer: Yes, it's possible, but generally not recommended.
While you can technically keep both names on the mortgage after divorce, this arrangement poses significant risks.
If your ex-spouse misses payments, your credit score will suffer damage, even if your divorce decree states they're responsible for payments. Mortgage lenders aren't bound by divorce agreements, so they'll hold both borrowers accountable for the debt.
If keeping both names on the mortgage is temporarily necessary, protect yourself with detailed documentation in your divorce agreement about payment responsibilities, consequences for missed payments, and a clear timeline for eventual refinancing.
Quick Answer: While not automatically required by law, it's often legally mandated in your divorce decree and usually the best option for financial protection.
Refinancing is typically the cleanest and safest solution when one spouse keeps the home. Refinancing accomplishes two critical things: It removes the departing spouse from financial responsibility for the loan, and can provide cash to pay the departing spouse their share of equity.
Your divorce decree may specifically require refinancing within a set timeframe—often 60 to 90 days after finalization. Even without this requirement, remaining on a mortgage with an ex-spouse leaves you financially entangled and vulnerable to credit damage from missed payments.
Quick Answer: If your name is on the mortgage, you're still fully responsible for payments regardless of what your divorce decree states.
This is one of the most common and troublesome situations we see. If your name remains on the mortgage and your ex-spouse stops making payments, the lender can (and will) come after you for payment. The lender isn't bound by your divorce decree, and late or missed payments will damage your credit score.
To protect yourself, either sell the home, refinance, or, if absolutely necessary, make the payments yourself and seek legal remedies through the court to enforce the divorce agreement.
Quick Answer: Possibly, through mortgage assumption, but this option is limited and often difficult to secure.
A mortgage assumption allows you to take over the existing mortgage while removing the other borrower. However, this option is only available with certain loan types, primarily FHA, VA, and USDA loans. Conventional loans typically don't offer this option.
Even when allowed by the loan program, many lenders are cautious or impose strict approval standards. The assumption must be approved based on your income and credit standing. The process can be complex, and lenders often resist or impose additional hurdles even for eligible loans, making refinancing the more reliable option in most cases.
Quick Answer: Yes, but lenders have specific requirements for counting this income.
Lenders can count alimony and child support as qualifying income, but typically require:
The reliability and consistency of these payments are crucial for lender approval. If payments have been irregular, lenders may be hesitant to count this income toward qualification.
Quick Answer: Typically six to 12 months of receipt history, depending on the loan program.
Most conventional loans require at least six months of documented receipt history. FHA and some other government loan programs may require up to 12 months of consistent payment history.
The lender will also need to verify that these payments will continue for at least three years from the date your loan closes. This verification ensures the stability of this income source for your ability to make mortgage payments.
Quick Answer: You have options, but you'll need to take specific steps to rebuild or work around credit issues.
Credit damage is common during divorce, whether from joint accounts that fell behind, disputes over who pays what, or simply the financial strain of maintaining two households.
If your credit has suffered, consider:
Quick Answer: Yes, but with important considerations regarding responsibility and relationships.
A co-signer can help you qualify if your income or credit isn't sufficient on its own. However, this creates a significant financial responsibility for the co-signer, as they become equally liable for the mortgage.
Before pursuing this route, consider:
Quick Answer: This decision should balance emotional considerations with financial reality.
While emotional attachment to the family home is understandable, especially with children involved, keeping the home isn't always the best financial decision.
Consider:
Sometimes selling is the cleaner, less complicated option that provides both parties with capital to move forward independently.
Quick Answer: Equity division varies by state law and your specific agreement.
In community property states, equity acquired during marriage is typically split 50/50. In equitable distribution states, courts divide equity "fairly" but not necessarily equally, considering factors including each spouse's income, contributions to the property, and custody arrangements.
Your specific divorce agreement may outline a different arrangement. The equity calculation is generally:
Current home value - Outstanding mortgage balance = Total equity
This equity is then divided according to your agreement or court order.
Quick Answer: A buyout allows one spouse to keep the home by compensating the other for their equity share.
In a buyout, the spouse keeping the home pays the departing spouse for their share of equity. This typically happens through:
For example, if your home is worth $400,000 with a $300,000 mortgage balance, there's $100,000 in equity. If split equally, the spouse keeping the home would need to provide $50,000 to the departing spouse, often through a cash-out refinance.
Quick Answer: Several alternative arrangements can work when a traditional buyout isn't feasible.
If you can't qualify for or afford a refinance large enough for a buyout, consider:
Quick Answer: The distinction affects your loan terms and how much equity you can access.
A rate/term refinance simply replaces your existing mortgage balance (potentially with a different rate or term), while a cash-out refinance allows you to borrow more than you currently owe and receive the difference in cash.
For divorce buyouts, a cash-out refinance is typically necessary to access equity for the buyout payment. However, cash-out refinances usually:
Quick Answer: It's legally possible in some cases, but generally not recommended unless absolutely necessary.
While refinancing is possible if the loan is solely in one spouse's name and the title is clear, most professionals recommend waiting until after finalization.
Refinancing before finalizing your divorce can create complications:
Most mortgage professionals recommend waiting until your divorce is final to avoid documentation conflicts and ensure loan terms align with the final agreement.
Quick Answer: An owelty lien is a specialized tool that helps facilitate home equity division in divorce, especially valuable in Texas.
An owelty lien is a formal document that records one spouse's right to a portion of the home's equity. It's particularly valuable in Texas, where it allows divorcing homeowners to access up to 95% of the home's value for equity buyouts (versus the standard 80% limit for cash-out refinancing).
The process works like this:
This approach can enable access to more equity and better loan terms—especially in Texas, where owelty liens are treated differently for underwriting purposes. In other states, results may vary, as most states don't treat owelty liens as separate from cash-out for underwriting purposes.
Quick Answer: Yes, several alternative funding methods exist, each with distinct advantages and disadvantages.
Alternative buyout funding methods include:
Quick Answer: Specific, clear language about property division, timing, and contingencies is essential.
Your divorce decree should contain detailed provisions about:
Having your mortgage professional review this language before finalizing your divorce can prevent serious problems with future financing.
Quick Answer: A properly executed deed is essential—typically a quitclaim deed in divorce situations.
The most common method is a quitclaim deed, which transfers whatever ownership interest one spouse has to the other without warranties.
This document must be:
Some states or situations may call for different deed types, such as warranty deeds or special warranty deeds with owelty of partition. Consult with your attorney to determine the appropriate deed type for your situation.
Quick Answer: No, deed transfer and mortgage responsibility are completely separate matters.
This is a dangerous misconception that can lead to serious financial problems. A quitclaim deed only transfers ownership rights (title) to the property. It does NOT affect who is responsible for the mortgage.
Even if you transfer your ownership interest via quitclaim deed, you remain fully liable for the mortgage if your name is on the loan. The only ways to remove mortgage responsibility are through refinancing, loan assumption (if permitted), or selling the property and paying off the loan.
Quick Answer: Both professionals serve different, complementary roles in the divorce home financing process.
An attorney drafts the legal documents and ensures your legal interests are protected, while a mortgage advisor (ideally one experienced with divorce situations) helps you understand financing options and requirements.
The best results come when these professionals work together. Your attorney might inadvertently include language in your decree that creates problems for financing, while your mortgage advisor might not fully understand the legal implications of certain arrangements.
Quick Answer: Focus on financial feasibility, both short- and long-term.
Key questions to consider:
Quick Answer: Making emotional decisions rather than financial ones, often by trying to keep a home they can't afford.
We see clients make emotional decisions about keeping the family home—understandably so—without fully understanding the financial implications.
This can lead to:
Take time to analyze the true costs and benefits of each option before making such a significant decision.
Quick Answer: Typically 30-60 days after the divorce is finalized, provided all documentation is in order.
The timeline generally works like this:
Delays can occur if:
Quick Answer: Seek professionals specifically experienced with divorce-related home financing.
For the best guidance, look for:
Navigating home financing during divorce is complex, but you don't have to figure it out alone. At Contour Mortgage, we've helped thousands of clients through this challenging transition since 1993—providing both the technical expertise and compassionate guidance needed during this difficult time.
The questions we've answered here are just the starting point. Every divorce situation is unique, with different financial circumstances, emotional considerations, and long-term goals.
Our team of mortgage experts can provide personalized guidance for your specific situation, helping you make informed decisions that protect your financial future and provide a foundation for your fresh start. Contact a home financing expert today.