Co-Owning the House After Divorce: Read This Before You Skip the Refinance
With mortgage rates much higher than a few years ago, many divorcing couples simply can’t justify refinancing and losing their low-rate loans. Often, one spouse wants to remain in the marital home and there’s no need to tap the home’s equity to equalize the settlement because other assets—like a 401(k), brokerage account, pension, or another property—can balance things out.
When the plan is to keep the existing mortgage, be aware of the trade-offs.
Why leaving the joint loan in place is risky
Both borrowers stay on the hook. If the mortgage is in both names, the lender will continue to view both spouses as responsible, no matter what a separation agreement or divorce decree says. If the in-home spouse misses payments—because of a job loss, disability, or cash-flow strain—the out-of-home spouse must step in or risk credit damage.
Underwriting workaround ≠ liability release. You can include specific language in your agreement assigning the mortgage and related home costs to the spouse who keeps the property. Many lenders will then exclude that payment when the other spouse applies for a new loan. Helpful for qualifying, yes—but it doesn’t remove legal liability on the existing mortgage.
Don’t give up title while staying on the loan. Taking the out-of-home spouse off the deed while they remain on the mortgage is usually a bad idea. That leaves someone liable for the debt without ownership, a worst-of-both-worlds outcome.
How titling changes after divorce can surprise you
In many states, once the divorce is final, the home typically shifts from tenants by the entirety (each spouse treated as 100% owner) to tenants in common (50%/50% owners). That can lead to tough situations:
If the out-of-home husband dies and leaves his share to a new spouse, the new spouse could demand a sale of her 50%, creating turmoil for the first spouse still living in the home.
If the in-home wife dies and leaves her share to minor children, the ex-husband might be unable to cover payments alone. His credit could suffer before probate is resolved.
Ongoing payments can skew “fair” ownership
If the in-home spouse has been making the mortgage payments for years, you could argue they deserve more than 50% of the value. Keeping ownership aligned with each person’s ongoing contribution would require regular deed updates to change percentages—an administrative task that’s easy to miss.
A practical path forward
Given these complications, it’s wise to seriously evaluate refinancing or selling the home:
Rates change. Interest rates can fall again, giving you another chance to refinance later.
Few stay 30 years. Most people don’t keep a mortgage for 30 years; the average tenure is closer to 13 years.
Do the full math. Compare payment responsibility, title protection, credit exposure, and future what-ifs—not just today’s rate.
For a clearer view of the pros and cons of keeping the marital home, review related guidance and run the numbers before signing. FMD Wealth Advisors can coordinate with your legal team to structure mortgage, title, and settlement terms that protect both parties—today and down the road.
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