In 2020 and 2021, millions of homeowners locked in mortgage rates under 3%. Today, with rates over 7%, many divorcing couples find themselves facing an unexpected dilemma: should they fight for the house, or fight to keep the rate?
Divorce and mortgage decisions have always been complex, but today’s high-rate environment introduces a new layer. That ultra-low rate from three years ago might be one of the most valuable financial assets in a couple’s portfolio.
If you’re going through a separation or divorce, here’s how to evaluate whether keeping the house—and more importantly, the rate—makes financial sense, along with strategies that allow one spouse to stay in the home without giving up that coveted sub-4% interest rate.
Option 1: Loan Assumption (The Gold Standard)
If your existing mortgage is assumable (typically FHA, VA, or USDA), one spouse may be able to assume the loan directly. That means taking over the current balance, rate, and remaining term without triggering a refinance or rate reset.
“Theoretically, it’s the cleanest option,” notes Veterans United. “But many servicers make the process far more difficult than advertised.”
Assumption requires full income and credit requalification. The spouse keeping the home must qualify solo, and the other spouse must agree to be removed from the loan and deed. Plus, the assuming party typically needs enough cash to buy out the other spouse’s equity—unless a property division offset is negotiated.
According to Scotsman Guide, red tape, long processing times, and inconsistent lender policies can make assumptions tedious and underutilized—even when they’re technically allowed.
Still, if available, assumption is the best way to preserve both ownership and the rate.
Option 2: Keep the Mortgage Jointly (For Now)
Some couples choose to delay any mortgage changes post-divorce, allowing one person to stay in the home while both names remain on the mortgage. It’s risky—because both credit profiles are on the hook—but it allows the household to retain the low rate temporarily.
This option may work if:
- Both parties are amicable
- A legal agreement outlines who pays what
- The partner leaving the home doesn’t need to qualify for a new mortgage immediately
Just be aware: your divorce decree does NOT remove you from the mortgage. As the CFPB explains, many divorcing homeowners wrongly assume that court orders automatically change mortgage obligations.
If your ex misses a payment, your credit takes the hit.
Option 3: Use Other Assets to Buy Out Your Ex
If assumption isn’t allowed or the lender won’t cooperate, another option is to keep the existing mortgage in place while using other assets to buy out your spouse.
That might mean:
- Taking a 401(k) loan to fund a buyout
- Drawing from a HELOC or second mortgage
- Offsetting with other marital assets (retirement accounts, vehicles, etc.)
The mortgage stays untouched, and the spouse who’s leaving gets compensated fairly. You keep the house and the rate.
Pro tip: if you go this route, make sure to update title and deed ownership, and clarify mortgage responsibility in your divorce paperwork.
Option 4: Refinance or Sell (The Last Resort)
If no other options are viable, you may need to either:
- Refinance the home in one spouse’s name (likely at a much higher rate)
- Sell the home and divide proceeds
Unfortunately, refinancing today may mean going from a 3% rate to 7%+. That increase can add hundreds or even thousands to the monthly payment.
In some cases, the new mortgage may be unaffordable for either spouse, forcing a sale.
Option 5: Consider Co-Owning Post-Divorce
If neither party wants to refinance or sell, but one needs housing stability, a growing number of couples are exploring co-ownership agreements post-divorce.
This usually involves:
- One party staying in the home
- A set timeline to refinance, buy out, or sell
- Shared title but legally separated finances
While not common, this strategy allows both spouses to benefit from future home appreciation and preserve a valuable mortgage until it makes sense to unwind.
As DivorceNet notes, it’s vital to put these agreements in writing and revisit them annually.
What If My Ex Stops Paying the Mortgage?
If your name is still on the loan, you are still legally liable — even if your ex is the one living in the home.
Late payments, missed payments, or defaults can ruin your credit score and disqualify you from new financing.
According to Bankrate, it’s not uncommon for these situations to devolve. If trust is low, it’s better to restructure the mortgage than rely on informal agreements.
Final Thoughts: Know When the Rate is Worth the Risk
That 3% mortgage might feel like gold — and in many ways, it is. But not at the expense of your financial independence, credit health, or legal clarity.
Start by asking:
- Is assumption an option?
- Do I want to co-own or refinance?
- Can we trade assets to keep the rate intact?
Then get help: a qualified lender, real estate attorney, or divorce mortgage advisor can help structure the cleanest path forward.
In today’s market, keeping the house and the rate is possible—but it takes planning, documentation, and a clear understanding of the risks involved.
