If the Texas court awards you the family home in a divorce, your next challenge will be affording to stay in it. One of the options available to awardees is an assumable mortgage. If you are considering this option, it’s important to dispel the common misconceptions about assumable mortgages in Texas.
Both parties are equally responsible for the mortgage
This is not always the case. You can use an assumable loan to keep the family home after a divorce. The party awarded the house will need to qualify for the loan on their own. This means that they will need to have good credit and income. If they are eligible, they can assume the mortgage and make the payments. The other party is then released from any responsibility for the loan.
The party who assumes the mortgage will make all the payments as per the original agreement
This is not true. The party who assumes the mortgage may negotiate a new payment plan with the lender. This could include a lower interest rate or a more extended repayment period. Additionally, the other party may agree to help with the mortgage payments.
Assumable mortgages are only available for government-backed loans
Assumable mortgages are typically available for government-backed loans like FHA or VA loans. However, private lenders like banks, mortgage companies and credit unions may offer this option too. Private lenders may have stricter lending requirements because the government does not back them up. For example, they may have a due-on-sale clause, which can prevent you from assuming it to someone else in the future when selling the property.
The family home is one of the most valuable marital assets in a divorce. If you are lucky to get it in its entirety, you can use an assumable loan to protect it. However, ensure that this is the best option for you before pursuing it.