What if I Can't Refinance After Divorce?

Regardless of your reasons for divorce, the process is almost often a stressful one. And when you and your spouse own a house together, splitting your assets can rapidly get tricky.

Usually, the spouse that gets the house in a divorce is going to refinance the mortgage — however, subject to the circumstances, that might not always be feasible. Clearly, you might be wondering: What happens if I am unable refinance following divorce?

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When Do You Need to Refinance After Divorce?

When a marriage concludes, the spouses (or the court) are required to establish who gets what. Typically, they do this with the assistance of a family law attorney. If the spouses own a house together, they usually are going to do one of the following:

Sell the house and divide the profits
Have one spouse purchase the other’s equity and take over the mortgage

If one spouse acquires the home, they are required to remove the other spouse’s name from the mortgage. If they fail to, the other spouse could be responsible for neglected mortgage payments. Usually, the best way to take one spouse out of the mortgage is to have the other spouse refinance the house in their name only.

Why Your Refinancing Application Might Be Denied

When you both got approved for a mortgage, the mortgage provider took each of your income into consideration. Nevertheless, when refinancing the house in your name only, the provider is looking at only your income. The provider also takes the following aspects into consideration:

Your assets
Your credit score
Your debt-to-income (DTI) ratio

Getting an approval on a just your income is typically more challenging. When you have any debt in any way, going from a double income to a single income increases your DTI. By itself, divorce is not going to lower your credit score; however, it’s not unusual for people to struggle with credit issues following divorce.

In general terms, you are required to meet the following criteria for refinancing your mortgage:

Your credit score needs to be at a minimum of 620
Your DTI ratio needs to be 43% or less
You need to have enough steady income stream for affording mortgage payments

When you apply to refinance your mortgage following divorce, the provider takes a close look at your numbers to establish whether you are likely able to repay the mortgage by yourself. If the provider believes there’s a risk of you being incapable of doing so, they may not approve your application.

What Happens if I am Unable to Refinance After Divorce?

When your application for refinancing gets denied, keep your chin up on keeping your home. You might consider these possible alternatives:

Release of Liability

In a lot of cases, you might be able to acquire a release of liability to take your spouse out of the mortgage. This is a document in which your mortgage provider officially releases your spouse from all liabilities of the mortgage.

If you acquire a release of liability, you are likely to also need to ask your spouse to sign a quitclaim deed. Through this form, your spouse renounces any interest they have in the property.

These two documents are similar, but to guarantee you have exclusive rights to the house, you need both:

A release of liability to guarantee your spouse is not going to be liable for missed mortgage payments
A quitclaim deed to guarantee your spouse cannot claim ownership rights to the house moving forward

It’s important to keep in mind that a release of liability is not a fool-proof way to avoid refinancing the house. Some providers require you to refinance prior to them releasing your spouse from the mortgage.

Others might not require you to refinance, however, they may require you to prove you can dependably cover mortgage payments by yourself. If you can’t refinance, you could run into the same issue when trying to acquire a release of liability.

Including a Tailormade Agreement in Your Divorce Settlement

If you are unable to get approved for refinancing, and your provider isn’t allowing you to release your spouse from the mortgage and take it over on your own, you might need to get creative. When negotiating a divorce settlement, consider suggesting an agreement like this:

You and your spouse both stay on the mortgage until you can refinance
You are going to make all mortgage payments as agreed upon
When refinancing, you are, in essence, buying out your spouse’s equity

This arrangement could be appealing for your spouse. As the house appreciates its worth, the dollar figure of equity your spouse has is going to grow. When refinancing and buying out your spouse’s share of the house, they are likely going to receive a substantial payout.

Selling the Home

Once you file (or receive) divorce papers, you know that just about every aspect of your life is likely to change. Keeping your house could give you a sense of security, but if it looks like refinancing is going to be impractical, selling could be the best option.

When you and your soon-to-be-ex-spouse sell the house and divide the profits, you can buy a new home to begin the next phase in your life.

Source:

1. 1. “What if I Can’t Refinance After Divorce?” Retrieved on October 22, 2025 from https://www.consumershield.com/family-law/divorce/what-happens-if-cant-refinance

Ogborne Law, PLC In Scottsdale, AZ

Discussions about child custody issues are always difficult during a divorce. While there is no way to make them easy or comfortable, you can find ways to work together. The collaborative divorce process helps with tools and professionals to make child custody and other decisions a little more manageable. By working together as a team, you’re able to make the decisions that are best for the kids.

Collaborative divorce can make these challenging times more manageable. It requires you to work with your spouse at a time when you have decided you need to go your separate ways. When it comes to child custody, though, you want to do all you can to make the right parenting decisions. Collaborative divorce can help create pathways for you to cooperate. If you live in the Phoenix/Scottsdale area and want to learn more about collaborative divorce, contact Ogborne Law today.