When Illinois couples who are also homeowners get a divorce, they must decide what will happen to the family home. If one person keeps the home, both could remain on the joint mortgage. However, this could be a major disadvantage for the one who does not keep the home since a missed mortgage payment could cause significant damage to that person’s credit score.
The other two choices are to refinance or assume the joint mortgage. Many people have misconceptions about assuming a mortgage. It can be an attractive option because it keeps the terms the same. It also means that a person does not have to pay many of the up-front fees associated with a refinancing. However, an assumption requires as much or more documentation about income and assets as a refinancing, and it can take much longer. While a refinancing may be completed in just a month, an assumption may take three to six months. Furthermore, interest rates under a refinancing can still be favorable.
Some mortgages do not even qualify for an assumption, and this is the case for most of the ones issued after 2008. Homeowners may want to ask for a copy of the promissory note and check it for themselves since people are sometimes told their loan can be assumed when it cannot be.
Many elements of property division in a divorce include complications such as these. For example, a couple might look at these assumptions and decide that severing all financial ties by selling the home is the easier option. However, selling a home can take time, and they might need to decide who will pay for upkeep and other costs in the meantime.