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Refinancing or assuming a mortgage after divorce

When couples in Pennsylvania get a divorce, one partner may decide to keep the marital home. Even in this situation, both spouses might decide that they will remain on the joint mortgage. This can be risky because a missed payment will affect both of them even if only one spouse is still living in the house and paying the mortgage.

Some other options include removing one spouse from the picture. The mortgage can be refinanced, or one person can assume the mortgage. The first step should be to make sure it is possible to assume the mortgage loan. The promissory note can be checked for this information. Some spouses may think assuming a mortgage will be both easier and a better financial choice, but this is not always necessarily true.

One of the main reasons people choose to assume a loan instead of refinancing is because they want to keep the same terms. However, if interest rates are low, it is possible to get good terms with a refinance. Some think a loan assumption will mean less time and paperwork, but a refinance can actually be completed in around a month while an assumption may take as many as six months. An assumption also requires thorough documentation of assets and income. If the divorce agreement sets a certain time frame for completion, an assumption may fall outside that deadline.

A home is not the only asset that can cause complications during the property division process. For example, with a 401(k) or a pension plan, it is necessary to have a document called a qualified domestic relations order. This is a complex document that must have the plan administrator's approval. An attorney could help make sure that a client performs due diligence during the property division process.

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