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Mortgage misconceptions related to divorce and the marital home

Divorcing couples in Virginia and elsewhere tend to disagree over issues like alimony, retirement accounts, pensions and child support. The marital home is another common source of contention when a marriage comes to an end. Oftentimes, a settlement results in one spouse keeping the home. If this is what happens, there are typically three options with the mortgage: keeping the original joint mortgage, refinancing it, or assuming the original mortgage.

Assuming the home loan is the option about which many people have lingering mistaken beliefs. The biggest mortgage misconception is that all loans can be assumed. In fact, many loans cannot. People can find out if their loans are assumable by looking at the original promissory note or calling the lender. Another misconception is that a mortgage assumption can be completed with a simple call to the lender. However, someone assuming a home loan will still have to prove that he or she can handle the full debt him or herself. This process usually involves providing documentation of one's income, assets and other relevant details.

Some newly single individuals also believe that assuming the home loan is always the best way to go after property division decisions have been made. But refinancing when rates are reasonable could result in lower monthly payments and better terms. A loan assumption can also be a longer and more involved process. A refinance normally takes about 60 days while a mortgage assumption could take six months or more to complete. Rates during this longer period could also fluctuate or rise.

During the end of a marriage, a divorce attorney may recommend that a person work with an accountant or financial advisor so he or she can get a better idea of what his or her financial situation will likely be like post-divorce. This information may make it easier for well-informed decisions to be made about how to handle the marital home and other joint assets. Best to consult with a mortgage broker to be sure you can qualify on a new loan before you sign a settlement agreement.

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