Those who own a home in Connecticut may believe that they can assume a mortgage in a divorce. However, this is not necessarily the case, so it is a good idea to read the mortgage document before deciding on what to do with a marital home. Since 2008, it has become less common for a mortgage to be assumable. Even if a mortgage can be assumed by another person, there is no guarantee that it will be allowed to happen.
A lender will need to check an individual’s credit score, income and other variables before allowing it. In that regard, a loan assumption is a lot like a loan refinance. Individuals are cautioned against assuming that taking over a current loan is always better than refinancing. Having the ability to spread the current loan balance over 30 years may result in a lower monthly payment.
This may be true even if the interest rate on the new loan is higher than the one on the current mortgage. It is also important to calculate how much it would cost to assume a loan compared to closing costs paid when refinancing a mortgage. Doing so may help a person better understand the true cost of each option and make an educated decision as to how he or she wants to proceed.
In a divorce, there are many issues that need to be resolved. One issue is likely to be how to split a marital home. An attorney may be able to help a person learn more about the tax implications of selling a home or retaining a loan as opposed to trading it for other assets. An attorney may also help individuals learn more about how a mortgage is treated in a divorce decree.