Divorce and Mortgage
Whichever of you or your spouse is awarded the family residence will almost certainly also be awarded the mortgage against it and ordered to assume all liability for payment on it moving forward. Occasionally, the person receiving the property will also be ordered to refinance the mortgage to relieve the spouse of any future liability on it. But, that is not normally done. The cost of refinancing can be high; the interest rate might be higher, increasing the amount of the monthly payment; the spouse receiving the residence might not be able to qualify, income-wise, for a new mortgage. There are many reasons why courts do not usually order the mortgage refinanced. Commonly, the person not getting the residence will want it refinanced so it will no longer appear as his or her obligation on a credit report. People are naturally concerned about the impact the old mortgage might have or their ability to buy another house. Customarily, the spouse who gets the house will be ordered to sign a "deed of trust to secure assumption" as security for payment of the mortgage if he or she fails to timely make all the required payments on the mortgage. This will protect the spouse not receiving the house as part of the property division at divorce, and enable him or her to obtain a new mortgage on a new residence after the divorce. If that is your situation, you can rest easier knowing that most lenders will be satisfied with being provided a copy of your divorce decree showing that your spouse was awarded both the residence and the mortgage and has signed a deed of trust to secure assumption of all of your obligations arising from the mortgage. Thus, if your ex-spouse fails to fulfill the mortgage obligations, and the lender looks to you for payment, you can foreclose on the deed of trust and have the house sold to raise the money needed to pay off the mortgage and repay you any sums you may have advanced.