What Happens to Your Mortgage During Divorce? A Step-by-Step Guide
- Lisa McNally
- Jul 16
- 4 min read
For many divorcing couples, the home—and more specifically, the mortgage—becomes one of the most complex and misunderstood elements of the property division process. While splitting equity may seem straightforward, the mortgage adds an entirely different layer of legal and financial responsibility that can have long-term consequences if handled improperly.
As a Certified Divorce Real Estate Expert (CDRE), Certified Divorce Financial Analyst (CDFA®), and licensed real estate broker in both New Hampshire and Maine, I specialize in guiding high-net-worth clients through the strategic decisions that protect their credit, equity, and future home-buying ability.
If you own property and are facing divorce, this guide will walk you through exactly what happens to your mortgage—and how to avoid the common pitfalls that cost people thousands.
Why the Mortgage Is a Critical Divorce Factor
The mortgage isn’t just a shared debt—it’s a binding contract between you, your spouse, and your lender. Divorce does not change this agreement. Unless action is taken to remove or replace one party, both spouses remain legally responsible for the loan—even if only one remains in the home.
Failing to handle the mortgage correctly can result in:
Damaged credit
Missed payments
Legal liability for your ex-spouse’s financial decisions
Difficulty qualifying for a new loan after divorce
Understanding your options—and acting strategically—is essential.
Step 1: Identify Who Is on the Mortgage and Title
Before doing anything else, it’s important to confirm:
Whose name(s) are on the mortgage loan?
Whose name(s) are on the property title or deed?
Many couples assume that removing a name from the title is enough. It’s not. Only refinancing or paying off the mortgage removes a person from legal responsibility for the loan.
Step 2: Understand Your Mortgage Liability
If both spouses are on the mortgage, then both:
Are equally responsible for making payments
Will see the mortgage reflected on their credit reports
Are at risk if payments are late or missed
This applies even if:
One spouse agrees to “take over” the mortgage
The divorce decree assigns the mortgage to one person
The title is changed to reflect only one spouse
Lenders are not bound by divorce decrees. If your name is on the loan, you're still liable unless it's refinanced, assumed (rare), or paid off.
Step 3: Determine If One Spouse Will Keep the Home
If one party wishes to keep the home, the typical next steps include:
Refinancing the mortgage in their name only
Buying out the other spouse’s share of equity
Retitling the property to remove the other’s name
This process requires income verification, credit qualification, and potentially a cash-out refinance. As a CDFA®, I help my clients assess whether they can truly afford to keep the home—not just now, but long-term.
Step 4: Evaluate the Option to Sell the Home
In many cases, selling the home and dividing the proceeds is the cleanest, most financially sound option. This eliminates:
Shared debt
Potential credit damage
Long-term entanglement
If you choose to sell, both spouses will need to agree on:
Listing agent
Price
Showing terms
How proceeds will be divided
At McNally Group Realty, I act as a neutral, court-aware CDRE, helping both parties navigate a smooth and equitable sale.
Step 5: Review Legal and Financial Documentation
Ensure your divorce agreement includes:
Specific terms about mortgage responsibility
Refinance or sale deadlines
Procedures for resolving missed payments
Instructions for distributing sale proceeds
Also, consider working with a lender experienced in divorce mortgage planning to ensure the loan structure aligns with the divorce terms and credit protection needs.
Step 6: Consider Capital Gains and Tax Implications
If you sell the home as part of the divorce, your tax filing status and timing may impact capital gains exclusions:
Married couples filing jointly can exclude up to $500,000
Single filers can exclude only $250,000
Timing the sale before the divorce is finalized can offer tax advantages—something I often coordinate with divorce attorneys and CPAs to evaluate.
Step 7: Protect Your Credit Post-Divorce
Even after the divorce is finalized, be sure to:
Check your credit reports for mortgage accuracy
Verify that your name has been removed from the mortgage if a refinance occurred
Document all payments during the transition period
Monitor your ex-spouse’s compliance if they remain on the loan
Your mortgage history will continue to impact your credit for years. Protecting your score is critical for rebuilding your financial future.
Common Mortgage Mistakes in Divorce
Assuming the divorce decree removes you from the loan
Failing to refinance when required
Agreeing to a buyout without confirming refinance eligibility
Remaining on a mortgage “to be nice”
Ignoring lender timelines or legal paperwork
With luxury real estate and complex financial portfolios, these mistakes become even more costly. I help clients avoid them by coordinating with legal, financial, and lending professionals every step of the way.
Key Takeaways
Divorce does not remove you from your mortgage—only a refinance or full payoff can.
If one spouse keeps the home, they must refinance or assume full legal responsibility.
Selling the home may be the cleanest and most financially protective option.
Divorce decrees should include clear mortgage terms, deadlines, and protections.
Working with a CDRE ensures the process is handled strategically and with legal awareness.
Navigating your mortgage during divorce can feel overwhelming—but you don’t have to do it alone. Whether you're considering a buyout, refinance, or sale, I’ll help you create a clear plan that supports your goals and protects your future. Schedule Your Private Consultation Here
Lisa McNally
Certified Divorce Coach | Certified Divorce Mediator
Certified Divorce Financial Analyst (CDFA®) | Certified Divorce Real Estate Expert (CDRE)
Licensed Real Estate Broker (NH & ME)
Founder, Optimal Divorce Solutions
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