Deciding where you will live is an essential aspect of divorce. Some people want to stay in their family home, either because they are comfortable there or because they believe the transition will be easier for their children.
If you are planning on staying in your home, you need to know your options. There are several ways to retain your home and free your ex-spouse from the existing mortgage.
One of the most popular ways is loan assumption. Loan assumption is when you take over full responsibility of the mortgage loan. This removes your spouse’s name from the loan, leaving you as the sole remaining borrower.
When considering a loan assumption, it’s best to work with a qualified lender to fully discuss the options. We are not lenders and do not know the specific ins and outs of the lending process.
Below is just some general information about options people have explored in the past. For information specific to you, your current lender is a great resource. They can take a look at your current mortgage and let you know what options are available.
But before speaking with your lender it helps to have an understanding of what loan assumption is, which loans may or may not qualify, and some alternatives to loan assumption.
Further, the spouse not retaining the residence is often still owed an equalization for their community interest in the property. If an equalization is owed to the other spouse and you intend to obtain the funds for the equalization through a refinance of the home, be sure to discuss this with your lender as loan assumption may not be possible with this requirement.
If you do not have a relationship with your current lender, ask your attorney if they have a referral to someone they have worked with in the past.
Some lenders have more experience working with someone who is going through a divorce and can provide some additional guidance you may not get from someone inexperienced with the needs of a client during and after divorce.
What is a Loan Assumption?
Assuming a loan means you take over an existing loan with the terms that are currently agreed upon with the lender.
The only difference is that your ex-spouse’s name is removed from the document.This leaves you as the one who is legally responsible for the loan. You will need to discuss this with your lender to determine if this is something possible.
Some lenders charge a flat rate to the party assuming the loan. For government-backed loans, agencies might regulate assumption fees.
If your lender requires you to purchase a new title policy, the title company will also require you to pay some fees to process the title policy request, and if the lender or title company has an attorney review your documents, you will need to pay for that, too.
The fees you will need to pay depend on the loan type, your lender, and the title company who processes the assumption. So, be sure to ask your lender about all of the fees associated with assuming your loan if this is an option you would like to explore.
Why Do People Get Loan Assumptions?
Many people look into assumptions as a solution for removing an ex-spouse from an existing mortgage. This is done either after a judge awards them the family home or in their divorce settlement.
Removing your spouse’s name from the loan protects your future equity in the property, and it gives you the ability to make decisions regarding the home without them because they are no longer the responsible party on your loan.