Loan Assumption Divorce Process: How It Works for a Family

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By Divorce & Finance

Loan assumption divorce agreementLoan assumption divorce agreements can be complicated. Often, the family home is special to a spouse, and there can be certain circumstances where they may want to stay living there.

Let’s learn more about divorce and mortgage assumptions.

Mortgage Assumption Divorce Agreement: What Is It?

A Mortgage Assumption Divorce Agreement is when one partner is going to be able to keep the home after a divorce. Say that you want to remain in the family home because you love your property or there are children from the marriage and you want to provide them with a stable home, you will need a loan assumption because this is going to allow you to deal with the mortgage on your own.

In other words, loan assumption means that the mortgage will only be in your name, and your spouse’s name will be removed. You are the only borrower, and it will not be your responsibility to pay off this mortgage. When you take over, this will be to the terms of the mortgage that you already had. You can expect to pay the amount repayments and interest rate. The loan term will also not change.

The Process of Loan Assumption After Divorce

– How Do You Get Loan Assumption?

You will have to speak to a lender about a loan assumption. It can be best to speak to several lenders, which will ensure that you have options. In particular, interest can fluctuate, so you want to ensure that you are getting the best deal and that you are going to be able to afford to pay for the mortgage on your own. Indeed, if you are used to paying with your partner, this can be quite a transition.

You may have to pay some fees for a loan assumption agreement. This is because you are going to be making a change to the mortgage you had. So, the lender may require you to get a new title policy so that it can only be your name on the documents. Changing the documents can mean fees for the extra work they have to do.

You will have to provide your lender with evidence to enjoy a loan assumption with them. In particular, there is specific documentation they might need.

This can include:

  • Paycheck evidence
  • Proof of assets
  • Divorce decree
  • Credit report

Every lender is different, and you should ask them before your meeting what documentation they require. This will save time and make sure that the process is as easy as it should be.

– Qualifications for Assuming a Mortgage After Divorce

There are certain factors that have to be satisfied in order for this agreement to go ahead.

Namely, a lender is going to have to be satisfied that you are able to complete the loan by yourself. Since there will have been both of your names on the mortgage before, the payment would have been manageable. But, it can be a different story when you suddenly have to foot that bill yourself. So, a lender has to be convinced that you can handle that responsibility without any help.

You can tell a lender if you are going to be receiving spousal maintenance. This is something that will be seen positively if it is for a long time. But, the decision will be based primarily on whether your income is able to cover the mortgage. Your credit score can be a factor, as well as the debt you have.

Loan assumption after divorceSome mortgage lenders might have their own qualifications when it comes to a loan assumption after divorce. Thus, it is best that you contact them and explain your situation. This way, you can get all of the information you need to see if this is going to be the right route for you to go down.

– How Long Does an Assumption of a Loan Take?

The loan assumption process during divorce can be lengthy as it takes an average of two to three months. It will take up a lot of your time, and you have to be committed to seeing it through even if you have a busy schedule.

This might be something you do not want if you are going through a long divorce process that is causing you stress and anxiety. It is not a quick process that will take a matter of hours or days.

For instance, it is often the case that the lender will insist on a new loan title policy. This means that their team is going to have to examine your property, as well as collaborate with underwriters.

You will also have to be prepared to take on all of the paperwork that comes with a loan assumption. Again, this can take some time and be complicated. Going through a divorce can be challenging, and you have to weigh up whether you want this process at the same time.

– Can You Assume a Divorce Mortgage Transfer on Your Marital Home?

Not always. You will find that it is not always possible to assume a mortgage on your marital home. This can be down to the type of mortgage you have. For instance, a VA loan is not always going to be assumable. This is a loan you get when you are a veteran, and it can be granted to get a house.

In addition, you have to be prepared to pay a range of fees when it comes to a loan assumption. If you have this cash ready to pay upfront, you will have trouble going ahead with the agreement.

In some cases, it will make more sense to refinance your home. This could mean that you enjoy a lower mortgage rate. It can be best to speak to your lender and see if this is an available option for you. However, your spouse is still going to have paperwork they have to sign during the process.

Note that if you are going through a nasty divorce where you are at loggerheads with your partner, a loan assumption might not be the best idea. It will be hard to agree, and it means interacting with them for paperwork.

What Are the Benefits of Loan Assumption?

Here are some distinctive benefits you can enjoy when you get a loan assumption during a divorce:

  1. You Get To Stay in Your Family Home

If you love your house and where it is located, this can be an option so that you do not have to move. While a lot of people assume that you have to sell the marital home during a divorce, this does not have to be the case when you go down this route.

  1. You Don’t Need Permission With Any House Changes

What’s more, when the mortgage is in your name, you are going to be able to do anything you want to the home. You will not need your partner’s permission to make changes. So, if you wish to get an extension or change something substantial about the house, this is going to be your sole decision. The freedom that you can enjoy from owning the house on your own can make the process worth it.

  1. Your Interest Rate Stays the Same

You do not have to worry about the interest rating increasing when you make changes because of divorce. Therefore, while the repayment amount is going to increase since you are taking all of the responsibility, the interest rate should stay the same.

What Are the Disadvantages of Loan Assumption?

  1. Additional Responsibility

One of the disadvantages of loan assumptions is the responsibility that comes with them. Namely, you will be solely responsible for paying the mortgage on the property. This was a responsibility shared before, and you now have to take it over and be in charge of it. This is a big deal financially, and it is a commitment you have to ensure that you meet every month.

  1. Financial Constraints

If you have never dealt with a mortgage alone before, it may be a process that you are not comfortable with. You may end up getting into financial trouble if you are not able to budget each month. Unfortunately, some people make mistakes and realize that a loan assumption was not the best move. But, it is too late to fix the situation.

The lesson here is not to assume a loan for a property unless you want to. Yes, you may feel like you do not have a home after splitting up with your partner. It can be a huge lifestyle adjustment at first, and you may feel like you want to hold onto the home you are used to. But, it is a long-term financial commitment that you have to be prepared and committed to. If there is any doubt about this, it is best to walk away.

When Is It Best to Sell and Move On?

  1. If You Can’t Afford It

If you feel like you cannot afford to stay in your marital home by yourself, it will be best to sell the property and find something else. This way, you can find a property that you are able to afford comfortably. The last thing you want is to assume the mortgage and struggle to pay back the repayments. You want to still enjoy some freedom to do whatever you want to with your life at the same time as owning a home.

  1. If You Don’t Want Contact With Your Ex

If you want to keep contact as minimal as possible with your partner, it may be best to avoid assuming the mortgage and move toward purchasing another home. This way, you can sell the house and go your separate ways afterward. This way, you do not have to discuss what is happening with the house in any great detail. Instead, the house will go on the market and be sold.

  1. If You Don’t Understand the Process

If you are confused about loan assumptions or think that the process is going to be too complicated, it can be a better option to sell the property and have a fresh start. This way, you can avoid it altogether. There is no doubt that the process can be long and complicated. From sharing evidence with a lender to waiting on the assumption to happen, this is only an option you want to choose if you love the property.

  1. If You Don’t Like the Property

Lastly, only assume the mortgage if you like the property. This should not be a move to take if you want to seem better than your partner or boast because you have the marital home. Always ensure that you do it for the right reasons, or you might acquire a big and expensive responsibility that you do not want.


Loan assumption divorceWhether you have young children or you just adore your home, you can assume the mortgage after a divorce to stay living there.

Let’s summarize everything we know about mortgage assumptions:

  • A mortgage assumption is when one spouse can keep the home after a divorce, and they take on the mortgage.
  • There are specific qualifications for assuming a mortgage, and it is not going to be an option open to everyone.
  • A lender must be able to trust that you are able to deal with the mortgage by yourself and will not struggle with the repayments every month.
  • Often, the interest rate stays the same with a loan assumption, which can be beneficial for keeping your costs down.
  • You might be able to enjoy a lower mortgage rate in some cases when you refinance your home.

Mortgage assumption can be the right route for people who love their marital home or ensure their children grow up in a familiar environment. After all, going through a divorce can be tough on everyone. There can be some qualifications and new responsibilities for mortgage assumption, but it can be a rewarding process if you want to stay in your home.

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Divorce & Finance