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The pros and cons of assuming a mortgage after a divorce

In addition to alimony, retirement accounts and child custody and support, dealing with the marital home is often one of the most contentious issues among divorcing couples in Virginia. A common solution is for one ex to keep the home. In such a case, the next step is to determine how to handle the mortgage. One option is to retain the original joint mortgage. Another possibility is to refinance.

However, the option that tends to be at the heart of most mortgage misconceptions is loan assumption. This simply means one borrower is removed from the mortgage while the other assumes full responsibility for the remaining loan payments. As for misconceptions, one of the biggest is believing that all loans have an assumable option. In fact, many post-2008 loans don't have this feature. The original promissory note will have this information or you can call the mortgage company to find out.

There's also the assumption that the process of assuming full loan responsibility just involves some signatures. However, most lenders want proof that a borrower taking this step has the financial means to continue making scheduled payments without help from their former spouse. And while there are many benefits associated with an assumable mortgage, it's not always the best option at the end of a marriage for newly single borrowers. If rates are low, for instance, refinancing doesn't always mean payments will be higher. Also, if there is a desire to get the process over with quickly, refinancing is typically less time-consuming than assumption.

A divorce attorney may help a client make well-informed decisions about the marital home and other jointly accumulated property. In some situations, it's better for a soon-to-be ex-spouse to use proceeds from a home sale to purchase a property that's more affordable.

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