While fewer couples are divorcing in the United States, the financial ramifications for couples that go their separate ways can be considerable, especially when there’s a mortgage involved.
In the past decade, the U.S. marriage rate didn’t change much, hitting 16.7 in 2022, up slightly from 16.6 in 2012, according to the U.S. Census Bureau’s American Community Survey (ACS). However, divorce rates fell from 9.8 to 7.1 over the same time period. The rates are based on the number of women (age 15 and older) who married or divorced in the last year per 1,000 women.
For divorcing homeowners, understanding refinancing options for their mortgage is crucial for protecting their credit, ensuring a fair division of equity, and securing their financial independence. This comprehensive guide explains what happens to a mortgage during divorce and how refinancing can help both parties reach a financially equitable resolution as smoothly as possible.
Key Takeaways
- Divorce decrees don’t automatically change mortgage obligations; lenders still consider both original borrowers responsible.
- Refinancing creates a new mortgage that removes an ex-spouse, protecting their credit and improving their debt-to-income ratio.
- The person keeping the home must qualify for a new mortgage based solely on their own income, credit score and history, and financial profile.
How Divorce Impacts Your Mortgage
In community property states — including Arizona, California, Texas, and others — any debt acquired during the marriage is generally considered equally owned by both spouses, regardless of whose name is on the account or loan. This matters during a divorce because even if only one spouse signed the mortgage, the other could still be legally responsible for it. That can complicate refinancing or removing a spouse from the loan, especially if both parties are financially tied to the debt under state law.
In contrast, most other states follow equitable distribution, meaning a court can divide debts and assets in a way that’s fair but not necessarily equal. This may result in one spouse being assigned the mortgage during divorce, even if both names are on the loan — which underscores the importance of refinancing to match legal ownership with financial responsibility.
Regardless of the divorce decree’s stipulations, both spouses will continue being jointly responsible for the debt if both names are on the home loan. The non-resident former spouse might face significant financial vulnerability and potential ruin if the resident ex-spouse stops making on-time payments.
What Refinancing Can Do After a Divorce
Refinancing creates an entirely new mortgage loan, which offers several benefits in a divorce settlement. These include:
Get a New Loan Term and Interest Rate
You can choose another 30-year term for the lowest payments but face higher long-term interest costs because you’re resetting the clock on the loan back down to zero.
Related: How to Refinance Without Resetting the 30-Year Clock
Conversely, you can refinance into a 15-year loan to snag a lower interest rate but face much higher monthly payments. The best option depends on your monthly budget and your comfort level with the monthly payment.
Depending on when you first took out your mortgage, rates might have been lower (or higher). Either way, with refinancing, you’ll get a new interest rate.
A mortgage lender can run your scenario to see what mortgage rate you qualify for and how it’ll impact your new monthly payment.
How we source rates and rate trends
Rates based on market averages as of Dec 02, 2025.Product Rate APR 10-year Fixed Refinance 5.21% 5.26% 15-year Fixed Refinance 5.37% 5.42% 15-year Fixed Jumbo Refinance 6.08% 6.10%
Remove You or Your Spouse from the Mortgage
If you or your spouse wish to keep the home and can afford the loan solo, you can refinance to remove the other person from the loan, transferring sole liability to the borrower who intends to stay in the home. However, that person must qualify for the new loan on their own, which may be challenging with one income or if your credit is less-than-stellar.
Some lenders may also offer a loan assumption, which removes a borrower’s legal liability on the mortgage if they aren’t keeping the home post-divorce or adds the spouse who wasn’t originally on the loan but is awarded the property in the divorce decree.
Tap Home Equity to Pay Out One Spouse’s Equity
What happens if one of the ex-spouses is due a portion of the home’s equity in the divorce decree? The other spouse can do a cash-out refinance to withdraw some of the built-up equity as cash. They can then use that money to buy out the other spouse and roll that into the new loan.
However, this will result in a new loan with a larger loan amount than the current balance owed, so the spouse staying in the home needs to qualify for the cash-out on their own creditworthiness and income.
Some lenders offer divorce buyout refinance loans for this purpose, but they have different criteria than a standard refi loan. Divorcing partners might even use some of the cash-out funds to pay off debts they’re responsible for.
Why Removing a Spouse from the Mortgage After a Divorce is Important
Removing an ex-spouse from a home loan is a critical step that carries significant benefits. These advantages include:
- Eliminates financial vulnerability for the non-resident spouse.
- Improves their debt-to-income ratio, which frees up borrowing capacity to buy another home.
- Simplifies future property transactions without needing the former, non-resident spouse to sign off on any decisions to sell, refinance or rent out the property.
Release of Liability vs. Refinancing
While refinancing creates an entirely new loan, some lenders offer an alternative called a release of liability. This document absolves one borrower from their mortgage obligation to pay back the loan. With a release of liability, the lender agrees to remove one person from the loan obligation while keeping the original mortgage intact, according to Fannie Mae.
This option avoids the costs of refinancing (often 2% to 5% of the loan amount) and maintains the original interest rate. This might be preferable, especially if current rates are higher than your existing rate, which will increase your overall interest charges.
However, this option is the exception rather than the rule, and the borrower staying on the loan must have excellent credit, substantial income, and a low DTI ratio. Because most lenders view removing a borrower as increasing the risk of default, refinancing may be the more realistic choice for most divorcing couples.
What About the Title?
Removing someone from a mortgage doesn’t automatically take them off the property’s title, and vice versa. The title (or deed) assigns legal ownership rights over the property and requires a separate process for adding or removing owners.
Most couples use a quitclaim deed to add or remove owners from the title. This is a legal instrument that transfers ownership interest among parties without any warranties about the property’s title status, which is where a title search normally comes in.
Signing a quitclaim deed only affects property ownership, not mortgage responsibility. Even if someone is removed from the title and is still listed as a co-borrower on the mortgage, they’ll still be responsible for monthly loan payments until the mortgage is refinanced or a release of liability is completed.
Timing the Refinance with the Divorce
Deciding when to refinance the mortgage can be complicated. In most cases, couples typically wait until after a divorce decree is finalized in court to determine next steps.
The divorce decree might specify a specific time frame within which a refinance must occur. These clauses typically require the spouse staying put to refinance within 60 to 90 days of the divorce settlement, protecting the departing spouse from being entangled financally for an extended time.
Steps for Refinancing During or After a Divorce
The refinancing process during divorce isn’t much different from a standard refi, but there are some nuances and additional steps to bear in mind.
- Review your divorce agreement: Understand the requirements and deadlines for refinancing the loan and transferring title, as stipulated in your divorce decree. Your lawyer will also provide guidance.
- Shop for lenders: Rates and terms vary by lender and loan program. Get quotes from at least three to five different lenders, and consider a loan officer with a Certified Divorce Lending Professional (CDLP) designation.
- Gather financial documentation: Find recent pay stubs, federal tax returns, bank statements, your divorce decree (if finalized), and a list of assets and liabilities to provide to your lender. Learn more with our guide to the documents you need to refinance a mortgage.
- Apply for refinancing: The spouse keeping the home will apply for a new loan solely in their name. If your divorce isn’t completed yet, make sure to give the lender a heads up. You might have to wait until the decree is in hand to close on your refinance.
- Prepare for a home appraisal: The lender will order a refinance appraisal to determine the home’s current value. This will also help a divorcing couple understand how much equity they have, which may become part of the divorce settlement negotiations.
- Close on the new loan: Sign the new mortgage documents, pay closing costs, and complete the refinance. After this step, the resident spouse will be solely responsible for mortgage payments going forward.
- Get a quitclaim deed: The departing spouse will sign a quitclaim deed transferring their ownership interest in the property to the spouse keeping the home. You don’t need an attorney to do a quitclaim deed, but you typically need the form notarized and must file it with your local county clerk.
What If You Can’t Refinance After the Divorce?
If a refinance isn’t doable, here are some Plan B options to consider.
Mortgage assumption
Some loans, particularly FHA and VA loans, may be assumable. That’s where one borrower can take over the existing mortgage under its original terms, eliminating the costs and hassle of a refinance.
Sell the house
If refinancing isn’t in the cards for whatever reason, selling might be the easiest and most equitable solution.
Normally, courts will allow the borrower a certain amount of time to qualify on their own. If they don’t qualify, though, they will be forced to sell the home.
Selling the home eliminates the joint debt, converts home equity to cash that can be divided based on the divorce decree, and gives everyone a fresh start.
Second mortgage
If the spouse keeping the home can make payments but can’t qualify for refinancing, a second mortgage (or home equity loan) might provide the cash needed to buy out the other spouse’s share without upsetting the terms of the original mortgage.
However, the spouse keeping the home will have to qualify for the home equity loan and prove they have enough income to make both the primary loan payment and the second mortgage payment. Failure to pay either loan can lead to foreclosure.
Co-owning as ex-spouses
As a last resort, ex-spouses may opt to co-own the home even after divorce, but this arrangement requires a lot of cooperation and trust. It’s imperative to have a written agreement that lays out each person’s responsibilities for loan payments, maintenance costs and responsibilities, future sale plans, and buyout options.
It could be a temporary arrangement until the spouse who wants to stay put can afford and/or qualify for a home loan on their own.
Divorce and Refinance: The Bottom Line
Navigating a divorce can be hard enough, but adding a mortgage into the mix makes it trickier. Understanding your refinancing options and the alternatives can help you protect your financial future as you move on from the relationship. Whether you’re the spouse staying in the home or the one leaving, address the mortgage promptly and make sure your lender is in the loop.
Finding an amicable solution to your mortgage debt safeguards your credit, preserves your borrowing power for the future, and helps establish your financial wellness after the ink is dry on the divorce settlement.
Remember that mortgage liability stays with both spouses if they’re both on the home loan — no matter what your divorce decree states. Taking proactive steps to legally remove yourself (or your ex-spouse) from joint mortgage obligations provides everyone with critical financial protection so they can heal and move on.
If you’re ready to move forward, start your refinance application with Refi.com today.
