Divorce and Your Mortgage: What Happens to the Home Loan When Going Through a Divorce?
by: Victoria Campbell, Esq.
What Happens to your Mortgage After Divorce?
Divorce is never easy, and if you’re nearing the end of yours, you’re likely juggling a lot—emotionally, financially, and legally. If you’ve been awarded the family home or another property with a mortgage attached, you may be asking yourself: What happens to the loan now? Do I have to pay it off all at once? Can the bank demand a refinance?
The short answer: not necessarily. Here’s what you need to know.
The “Due-On-Sale” Clause—and Why It Usually Doesn’t Apply
Most mortgages include something called a “due-on-sale” clause. The idea behind this clause is simple: if the property is sold or transferred to someone else, the lender can demand immediate repayment of the full remaining balance. But here’s the good news: federal law offers protections—especially in the context of divorce.
Thanks to the Garn-St. Germain Depository Institutions Act of 1982, there are specific situations where a lender can’t enforce the due-on-sale clause. One of those is when property is transferred between spouses as part of a divorce.
You’re Protected—If the Property Meets These Criteria
To qualify for this exception, the property must be a residential property with fewer than five units (so, single-family homes, condos, and small multi-unit properties all count). If that’s the case, subsection (d)(7) of the Garn-St. Germain Act steps in.
What does it say? Basically, if you’re awarded the home through a divorce decree or property settlement, the lender can’t use the transfer as an excuse to call the loan due. You get to keep the home—and the mortgage—under the existing terms.
California Goes Even Further: AB 3100
California has taken an extra step to support divorcing homeowners. In September 2024, the state passed Assembly Bill 3100 (AB 3100). This new law, which kicks in for mortgages issued on or after January 1, 2027, makes things a bit easier for people navigating post-divorce mortgage issues.
Under AB 3100:
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If the mortgage is on a primary residence with fewer than five units,
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And if you’re already listed as a borrower,
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You can assume the loan from your ex—as long as you qualify based on the lender’s criteria.
Even better? Lenders will now be required to clearly explain the assumption process in the loan documents, so borrowers won’t be left in the dark.
What About Refinance?
If you’re the spouse who is not awarded the home, in most cases you can require a refinance of the mortgage to remove your name from the loan. This is often negotiated in the divorce settlement or included in the court’s judgment.
However, if the judgment doesn’t require a refinance, the bank cannot force one, and the spouse keeping the home can remain on the original mortgage—even if the other spouse is no longer on the title.
That said, most former spouses don’t want to remain liable for a mortgage on a home they no longer own. In today’s high-interest rate environment, though, refinancing may not be financially feasible. In those cases, the parties may agree—as part of the judgment—to delay a refinance and include specific protections, such as:
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Requiring timely mortgage payments and proof of payment
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Giving the non-owner spouse the right to trigger a refinance or sale if payments are missed
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Setting a firm deadline by which the loan must be refinanced or the house sold
These protections help balance financial realities with the need to untangle joint obligations.
Bottom Line
Dividing property is complicated enough—your mortgage shouldn’t add unnecessary stress. If you’re awarded the home, you likely can keep the existing mortgage, and you might even have the right to assume it in your name alone. And if you’re not keeping the home, you can often require that your ex refinance to remove your name from the loan.
If you’re unsure how your divorce might impact your mortgage or real estate, let’s schedule a consultation. Call us at (510) 835-9000, or reach out through our website.
