Divorce is never easy, and when a home and mortgage are involved, emotions mix with large financial decisions. In 2025, nearly half of all marriages end in separation. For many couples, the family home is their largest shared asset. If you carry a mortgage (as around 60% of U.S. homeowners do), you’ll need a solid plan for what happens next.
Below, we walk through five common paths to address a shared mortgage during divorce. You’ll also find tax tips, credit considerations, and guidance on what to do if your ex won’t cooperate.
What Happens to a Shared Mortgage in Divorce
In many divorces, two primary options prevail: sell the property and split the proceeds, or one spouse buys out the other and refinances or assumes the loan. But there are alternatives, like leaving the loan as-is or trading the home for another asset. Your choice will depend on your financial situation, willingness to cooperate, and mortgage terms.
Legal experts warn that disputes over the home can spiral. Couples allow a home to go into foreclosure rather than agree to a split.
1. Sell the Home and Split the Profits
This is often the cleanest solution. You list the home, sell it, subtract costs (repairs, commissions, taxes), and divide what’s left. Timing is crucial. Sell before finalizing the divorce, if possible, to simplify the division.
This route makes sense when:
- You don’t have children needing stable schooling
- Both parties can afford new housing separately
- Neither person wants to remain in the home
If negotiations fail, courts often mandate a sale anyway, making this the default.
2. One Spouse Assumes the Mortgage
If your mortgage is assumable, one person may take over the loan under its current terms. This is especially useful if they have a low rate, such as 3 percent, in today’s market. But not all loans allow this. Conventional mortgages usually don’t. Government-backed loans do under certain conditions.
Before proceeding, the taking spouse must meet lender qualifications like credit and income. You’ll also need to negotiate how to split home equity, using cash, retirement funds, or other assets.
Assumption works best when:
- The loan is legally assumable
- One spouse wants stability and can afford the payment
- The interest rate is better than what new loans offer
3. Refinance in One Person’s Name
More common than assumption, refinancing removes one spouse from the loan by replacing it with a new mortgage in a single name. The individual will need to qualify on their own. A cash-out refinance can help pay off the other spouse’s share.
A risk is that new rates might be higher than the original mortgage, especially for couples who locked in ultra-low pandemic-era rates.
Refinance is wise when:
- The loan is not assumable
- One spouse wants to remain in the home
- The remaining party can qualify financially
4. Keep the Mortgage in Both Names
In some cases, exes agree to leave the mortgage as is. One spouse may stay in the home, or both may move out and convert it to a rental property. While this avoids refinancing stress, it requires agreement on who pays what and how equity will be divided.
Complications include:
- One party’s late payment can hurt the other’s credit
- It may reduce ability to get new mortgages
- It demands ongoing trust and coordination
This path works when:
- One spouse cannot meet qualifications to assume or refinance
- You intend to turn it into a rental
- You trust the other person to make payments
5. Trade the Home for Another Asset
Instead of splitting assets evenly, consider a trade. One spouse keeps the home, the other receives equal value in another asset, such as retirement accounts or property. But tread carefully. Retirement funds are future income streams, not liquid assets, and may not balance with home equity in value.
Such trades can make sense when:
- You both prefer different assets
- Equity in the home balances with financial accounts
- Multiple properties or assets exist to divide
What If Your Ex Refuses to Cooperate?
When one spouse won’t negotiate, things get messy. You may need mediation or legal intervention. Courts often default to selling the home and splitting profits. Litigation increases costs. An extra $15,000 to $20,000 is not uncommon. Try to negotiate early, use legal advice, and aim for an agreement before reaching court.
Do You Need a Quitclaim Deed?
To transfer ownership, a spouse often signs a quitclaim deed, which gives up rights to the property. This is common when one person remains in the home after divorce and will assume full ownership.
Tax Implications of Selling After Divorce
When you sell a home, gains are taxed as capital gains unless excluded. Each party may exclude up to $250,000 if:
- You owned and lived in the home at least two of the last five years
- The divorce settlement allows one spouse to retain tax residency rights
If you held the home under two years, gains may be taxed at ordinary income rates between 10 and 37 percent. After one year, they’re subject to long-term capital gains rates, which range from 5 to 20 percent. Always check with a tax professional before making a move.
Will Divorce Impact Your Ability to Buy a New Home?
Yes. Differences in credit, income, or debt load can affect future mortgage approval. But lenders may allow alimony or child support as income if payments are reliable and expected for at least three more years.
Do You Need a Quitclaim Deed?
To transfer ownership, a spouse often signs a quitclaim deed, which gives up rights to the property. This is common when one person remains in the home after divorce and will assume full ownership.
Protecting Credit During and After Divorce
Although divorce itself doesn’t change your credit, joint accounts can. If your name remains on the mortgage and payments aren’t made, your credit can suffer. To avoid this:
- Notify your lender of the divorce
- Assign responsibility clearly in your agreement
- Add a clause that forces sale if one party can’t pay
- Stay proactive about refinancing or assuming the loan
Plan Smart, Stay Flexible
Dividing a shared mortgage during a divorce is one of the most complex financial steps you’ll face. Between selling, assuming, refinancing, or asset swaps, there is no one-size-fits-all. The best choice depends on your finances, emotional stakes, and willingness to cooperate.
Keep in mind, completing a buyout can be particularly challenging if you originally qualified for the mortgage using joint income and credit. After separation, qualifying on your own may require a different lending approach. This is where tailored solutions can make a significant difference.
SEI Mortgage offers flexible financing programs specifically designed to assist individuals completing a buyout of their shared home. Whether you’re exploring refinance options or alternative lending programs, our team can help guide you through the next steps with clarity and confidence.
If you’re considering keeping the home, reach out to explore what options are available to help you move forward.
