In most Tennessee divorces, a home is the largest single asset belonging to the couple. When assets need to be divided, splitting property can be problematic. Both parties may want to continue residing at the home or one partner might not wish to remain on the mortgage.
Most financial planners recommend remaining objective on the decision of whether to retain the house. A party needs to consider it both from an asset appreciation and a financing perspective before determining if the home is worth keeping. If not, a sale may be in order.
If the house is to be kept, the party not receiving the asset may demand to be removed from the mortgage. Doing so requires one of two actions, a refinance or loan assumption. A refinance means obtaining a new loan. The party will be required to show financial ability to pay, submit income information and credit reports and bear the normal closing costs.
A mortgage assumption is another possibility in some cases. The original loan papers will disclose if the mortgage can be assumed. If so, it will also identify whether the assumption is a qualified or non-qualifying assumption. A qualified assumption means that the party assuming the loan must be approved by the lender. The assumption will be on the same terms as the initial mortgage.
For those in this situation, a consultation with a family law attorney may be beneficial. If interest rates are lower than at the time the mortgage was first secured, a refinance may be a better alternative. Likewise, if there is equity in the home, a new loan may stretch payments, making them lower on a monthly basis. A possible assumption should be looked at as one option rather than the only choice.