A Closer Look at Assumable Mortgages in Divorce
Given that a couple’s marital home is often their most valuable asset, one of the most important issues we counsel our Florida clients going through divorce on is whether or not they want to, and can afford to, hold onto that home. If an individual decides that they plan to hold onto the family home, the next question ultimately becomes: how, and under what conditions? Below, we discuss some of your options in this endeavor, with a close look at what most people do if they decide to keep the home via assuming the original mortgage.
Three General Loan Options If You Are Keeping the Family Home
When someone decides that they want to keep the family home rather than sell it, they generally have three options:
- Assume the original mortgage: this is a good option if your current loan scheme allows for a loan assumption and has a good interest rate and payment terms;
- Refinance the joint mortgage: such that it is refinanced in their name only; perhaps if the current terms of the loan are less favorable; and (or);
- Retaining the original mortgage: because this involves one person keeping the home even though both remain liable on the joint mortgage, this only tends to work in a minority of circumstances, where there is a significant amount of trust, as both individuals listed will be responsible even if the one who has kept the home fails to make the payment.
The Pros of Assuming the Loan
There are a number of reasons why assuming the loan might be the best option for a lot of people: For one, it allows you to protect the terms of your current loan instead of refinancing it, which tends to occur at a higher interest rate. Assumption fees also tend to be lower than the cost of a refinance, and still allows you to separate yourself completely from the joint mortgage.
However, there are also a number of misconceptions associated with assuming the loan: For one, never assume that all loans are assumable. Keep in mind that, in fact, most loans issued after 2008 are not assumable. The way to determine this is by working with your divorce attorney to take a close look at your original promissory note. You always want to check on this before you apply to assume your mortgage.
In addition, keep in mind that assuming a loan is not as easy as making a phone call to your bank: to do so, your lender requires you to bring forward all of the same documentation that is involved in a refinance—assets, income, and other relevant information that will help prove that you are capable of making payments without the assistance of your ex.
Contact Our Florida Divorce Attorney to Find Out More
There are a number of dangerous misconceptions associated with assuming a loan that an experienced divorce attorney can help discuss with you before you move forward with that step. For example, sometimes, refinancing can actually result in a lower monthly payment. Contact the experienced West Palm Beach divorce attorney at the office of William Wallshein, P.A. today to find out more.