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Assuming a mortgage during a divorce

Many California couples who are going through the divorce process will have to decide what to do with the family home. Because of its value, the family home is often a source of contention during a divorce settlement.

At the end of the divorce settlement, one party may end up with control of the home. While that might seem like a win in the short-term, real estate can present various financial challenges. For example, if the home still has a mortgage, it has to be determined who will be responsible for paying it. There are some divorced couples who trust each other enough to keep their joint mortgage. Another option is for a spouse to refinance the joint mortgage in their name, giving them full responsibility and control of the payments.

The third option is for one spouse to assume the original mortgage. There are clear benefits to doing this, including being able to keep a good rate and payment terms in a mortgage. However, there are a lot of misconceptions about how this process works.

The first misconception is that all loans are assumable. This is not the case. In fact, the majority of loans issued after 2008 do not have the assumable loan feature. The best way to determine if a loan has this feature is to look at the original promissory note.

A second misconception is that assuming a loan is something that can be done by filling out a few pieces of paperwork. The truth is that before a lender allows a person to assume a loan, they're going to require a lot of the same information they required when the joint loan was first given.

A family law attorney could advise a client on financial issues associated with the divorce process. This may include things like how to divide joint property and debt.

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