Navigating Homeownership After Divorce

When going through a divorce, it can feel like a lot of change at once, and your home is often at the center of those changes. The good news is you have options, and understanding them can help you make choices that support your financial well-being and peace of mind during this transition.

Evaluating Your Current Home

Wondering what to do with your home? Who should be paying the mortgage? Should you sell your home and split the proceeds, or refinance and buy out your former partner? Before you make any big decisions or commitments, it’s best to understand who’s on the mortgage, who owns the home, and what the home is worth. This information will help determine:

• Who is responsible for payments, so there are no surprises or credit issues
• Whether keeping the home is realistic, and whether a refinance or mortgage assumption could work
• A fair number for any buyout or sale proceeds
• The paperwork and timelines you can expect

You can follow these steps:

Step 1: Confirm Ownership and Mortgage Status

Confirming the deed and mortgage details defines who is legally responsible for the loan. This allows the servicer to update records and refer to the correct point of contact.

What to check first

• Deed (ownership): Similar to a car, land has a title; title to property is usually conveyed by a deed. The most common deeds are warranty deeds and quit claim deeds. The owner is the grantee on the deed. In some states title can be transferred through other means such as a judgment or divorce decree. Whose name is on the deed? If you are unsure who owns your property you can consult with a title company, realtor or attorney. Some Counties also allow you to search addresses online to determine who owns the property.
• Note (promissory note): A Note is a borrower’s promise to repay a debt and it details the terms of the loan like the amount and interest. The borrower who signs the Note is legally obligated to pay the amount loaned.
• Mortgage or Deed of Trust (security instrument): Mortgages and Deeds of Trusts are also known as security instruments. These documents secure the property, or in other words they attach to the title of the property. A Security instrument grants the lender a claim to the property. If the terms of the security instrument are not met these instruments allow the lender to foreclose and take possession of the property. Often, there are borrowers named in the security instrument who did not sign the underlying Note.
• If both names are on the Note: Both parties are still responsible for the payments after the divorce. Your loan agreement stays the same after the decree; the lender still lists both borrowers until the loan is refinanced, assumed or paid off.

If you’re awarded the house but are not on the Note: Call the mortgage servicer and ask to be recognized as a confirmed “successor in interest.” This lets you:

• Receive account information and statements
• Communicate directly with the servicer
• Make payments

Being a successor in interest gives you access to the loan; you will essentially be treated as a borrower but are not personally obligated to repay it. You are not required to assume the loan to be considered a successor in interest. If you want to assume responsibility for the loan, you will need to assume or refinance it. The only time a successor in interest may need to assume the loan is if they anticipate having difficulty repaying the loan and need payment assistance from the lender. Whether or not a successor is required to assume the loan in order to modify it depends on the investor or insurer of the loan. In a divorce scenario the spouse retaining the property may also be required to assume or refinance the loan if the court orders the departing spouse be removed from financial liability for the home.

Tip: Contact the loan servicer early. Ask exactly what documents they need to update their records and discuss next steps. One document you may need is a quitclaim deed. If your ex is on title, a quitclaim can transfer their ownership interest to you. However, it doesn’t guarantee the property is free of liens or claims, and it doesn’t remove them from their financial obligation to repay the loan. We recommend you consult with a real estate attorney to determine the best way to transition your name to the title of the property.

Special Considerations in Community Property States

While the guidance above applies in most states—considered common law states—the laws differ in community property states. In these states, certain assets acquired during a marriage, including a home, are generally treated as jointly owned, even if only one spouse’s name is on the loan or deed. There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. That means:

• If one spouse bought the home during the marriage, or if marital funds are used to pay for the home, the home is generally considered equally owned by both
• Even if only one spouse’s name is on the mortgage, both may have rights and obligations related to the property
• Divorce courts in these states commonly divide marital property and debts 50/50 between spouses, including homes and their associated mortgages

Note: there are exceptions to these generalizations, so we always recommend consulting with a real estate professional.

Knowing the Records and Rules Prepares You For the Next Step

Whether you live in a common law state or a community property state, it’s important to know which rules apply to you. Reviewing ownership and your state’s requirements can give you clarity on your rights and how to proceed.

Step 2: Understand the Home’s Value and Your Equity

A verified home value is important for dividing the home fairly and setting a buyout amount. It also helps determine refinance feasibility and sale pricing.

Figure out what the home is worth

• Start with a real estate agent’s comparative market analysis (CMA) for a ballpark value
• In many divorces, a professional appraisal is required by the court or lender to set an official value

Calculate your equity

• Equity = current market value − current mortgage balance
• Positive number = you have equity to split or use in a refinance
• Negative number = the balance is higher than the value

If equity is positive:

• You can discuss a buyout (one spouse pays the other their share) and then refinance to remove the other borrower from the Note and mortgage. If the loan is assumable, one spouse may also be able to remove the other spouse through an assumption.
• If neither spouse keeps the home, you can sell and divide the net proceeds per the divorce agreement.

If equity is negative (or very low):

• Talk with your loan servicer about options. Depending on your situation and loan type, that conversation might include a loan modification (if one spouse plans to stay) or a short sale/deed in lieu (if selling and moving on). Each option requires lender review and documentation.

Options for Handling the Home

Knowing who is on the loan and how much equity you have gives you better insights into what to do next. You can stay and refinance or assume the mortgage, or you can choose to sell the home. Let’s break it down:

Stay and refinance

• What this means: With a refinance, you’ll apply for a new home loan in your name, choose a rate and term, remove your ex from the loan and update the title.
• When it fits: You plan to stay, you can qualify on your own, and you may owe a buyout to your ex for their share of equity. Courts sometimes set a deadline for this.
• Next step: Apply with a mortgage lender, verify income and credit, order an appraisal if required, close the new loan, then record a deed change to match ownership.

Stay and assume the mortgage

• What this means: A mortgage assumption is when one party takes over the existing loan and its terms, and the other party is released; assumptions are subject to lender approval.
• When it fits: When the loan allows assumptions and keeping the current rate makes sense. FHA and VA loans often allow assumptions. Some borrowers may also qualify for streamline refinance options in certain cases. You will still need divorce documentation and the servicer’s approval.
• Next step: Ask your servicer for an assumption packet, submit the divorce decree and income documents, complete the review, sign assumption documents and obtain a written release of liability for the departing borrower.

What Your Lender Will Look At

Whether you choose a refinance or mortgage assumption, your lender will want to see that you can afford the mortgage on your own. Here’s what they usually check:

• Income and stability. Lenders typically ask for recent pay stubs, W-2s or tax returns and employment verification. Any court-ordered support you receive may also count with the proper documentation.
• Debt-to-income (DTI) ratio: They compare your monthly debts to your gross monthly income to be sure the payment works within your budget.
• Credit history: On-time payments and responsible use of credit can help support your loan approval.
• Savings or reserves: Your lender may want proof you’ll still have money in savings after closing—often enough to cover a month or two of mortgage payments (requirements vary by loan program).

Sell the home

• What it does: Pays off the mortgage at closing and divides the net proceeds according to the divorce agreement.
• When it fits: Neither party plans to stay, or a refinance or assumption does not work.
• What to do next: Hire a real estate agent, set a price using a market analysis or appraisal, agree on how to handle costs, close the sale and distribute proceeds.

Deciding to Buy a New Home

If you choose to buy a new home, take some time to evaluate your finances before moving forward.

Take a credit snapshot

Pull your credit reports and scores. Note any joint accounts that still need to be closed or updated.

Determine your budget

Map your new monthly budget, including housing, childcare, support paid or received and insurance.

Understand your debt-to-income (DTI)

Lenders use this to estimate the mortgage payment you can qualify for.

Establish your down payment plan

If you sold the marital home, decide how much of the proceeds you will set aside for a down payment, closing costs and reserves.

Check ties to the old property

If you are still on the prior mortgage, that payment may count in your DTI. Lenders can sometimes exclude it with the right documentation showing your ex is making the payments, per the divorce decree, and has done so for a set period.

How Long After a Divorce Can You Buy a House?

You can buy a house immediately after your divorce is finalized, but most lenders require updated financials, proof that ongoing obligations (such as alimony/child support) are documented, and any property settlements are complete; waiting 1–3 months for credit and income stability documentation is common but not required by law.

Tips For Buying a New Home After Divorce

Buying a home after a divorce works much like it did before, with a few added considerations. Here are some tips that can help facilitate the process.

Collect documents

You’ll typically need recent pay stubs, W-2s or tax returns, bank statements, your divorce decree and any support orders. If using support income to qualify for your loan, lenders typically want proof of receipt and that it will continue for a set period.

Get pre-approved

A pre-approval is a formal determination by the lender that indicates how much you are likely able to borrow for a mortgage. Be sure to share your divorce-related paperwork with the lender when applying so your pre-approval reflects your current situation.

Separate finances cleanly

Close or convert joint credit cards and lines you no longer share, remove authorized users and update mailing addresses. This ensures your credit and debts reflect only you, so your DTI and pre-approval are accurate and you’re not tied to an ex’s accounts.

Compare loan products

Talk with your lender about loan options, rates and terms that fit your budget and goals. Ask for a few quotes so you can compare the full monthly cost (including mortgage insurance and fees). Also inquire about low-down-payment programs and any state or local assistance for your down payment or closing costs—they can lower what you need upfront.

Post-Divorce Title, Loan and Tax Checklist

Whether you choose to stay, sell, or buy again, this checklist can help you keep your records and tax reporting documents organized, accurate and updated.

For everyone

• Record any deed transfer (e.g., quitclaim) with the county and confirm the owners of record match your agreement
• Call your mortgage servicer; provide the decree/ID/recorded deed; update mailing address, autopay information and point of contact
• Save and file the recorded deed, closing statements/closing disclosures, Form 1098 (the mortgage interest statement), property-tax bills/receipts and your divorce decree
• Contact a tax professional about potential deductions and any capital-gains considerations tied to your plan

If you refinanced or assumed a mortgage

• Obtain a written release of liability from the servicer for the departing borrower
• Verify the new loan and recorded deed list the same owner(s)
• Update homeowners insurance to the current owner and lender; confirm escrow is set for taxes/insurance (if your loan has an escrow account)
• Keep the first three months of payment confirmations for your records

If you sold the former home

• Confirm the mortgage payoff posted and any liens were released
• Save the final settlement statement/closing disclosure and keep Form 1099-S (if issued) for tax reporting purposes
• Document how proceeds were divided under the agreement
• Close or transfer utilities and HOA accounts; set a forwarding address

If you bought a new home

• Confirm the title is in the correct name(s) and matches the new loan
• Confirm your homeowners insurance is in effect, have your agent list your lender on the policy and make sure your escrow (if you have one) covers taxes and insurance
• File your new closing disclosure, Form 1098 and property-tax receipts for next year’s return

Moving Forward

Ready for your next chapter? You may be juggling a few home decisions, but you don’t have to sort them out alone. With professional support and open communication with your lender and attorney, you can build a plan that fits your budget. Connect with a Pennymac Loan Expert for guidance and to explore your mortgage choices.

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home ownership refinance home equity taxes selling a home