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What happens to your mortgage post-divorce?

Occasionally when a couple in Virginia divorces they will agree to sell their family home and divide the proceeds. However, it is often the case that one spouse will keep the family home, especially if the couple has children living there. When this happens, couples will need to decide how to handle the mortgage once their divorce is complete.

One option is to keep the original mortgage as held by both spouses jointly, even though only one of the spouses is living in the home. This might work out for couples who trust each other despite their divorce. However, there are risks. If the spouse living in the home misses a mortgage payment, the other spouse could be held responsible for the payment, and the missing payment could affect both spouses’ credit — even that of the spouse who doesn’t live in the home.

Because the spouse who does not keep the home in the property division process generally does not want to be responsible for paying the mortgage, refinancing might be a good option. The party keeping the marital home will refinance the mortgage in his or her name only. Doing so means that the party who does not keep the home is no longer responsible for paying the mortgage.

Finally, sometimes it is possible for the parties to assume the loan. When a loan is assumed, the spouse who is not awarded the family home will have his or her name removed from the mortgage, but the spouse who is retaining the family home will not have to refinance. Doing so might be good if the current mortgage has a good interest rate. However, there are assumption fees to be paid, and not all mortgages can be assumed, especially those issued after 2008. Also, the spouse whose name is staying on the mortgage will need to provide documentation that he or she can afford to pay the mortgage on his or her own.

As this shows, couples have options when it comes to the mortgage post-divorce. These options should be considered during the property division process, so that a fair and appropriate result can be reached.

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