Thinking about keeping your home after divorce? Learn exactly what it takes, from qualifying for a new mortgage on your own, to preserving a low interest rate, to avoiding costly tax mistakes that could derail your plans.
Find out how to navigate Florida’s equitable distribution laws, federal mortgage guidelines, and other tax implications when refinancing your marital home during divorce proceedings.
Key Takeaways
- Deed ≠ Mortgage: Transferring title via quitclaim deed does NOT remove a spouse from mortgage liability. Refinancing is typically required.
- 6/36 Rule Conflict: Most lenders require 6 months of support income receipt, which often conflicts with standard 90-180 day refinancing deadlines.
- FHA/VA Assumptions: These loans can be assumed, potentially preserving pandemic-era rates and saving $800+ monthly.
- Tax Changes: Post-2018 alimony is no longer deductible for payers or taxable for recipients under TCJA.
- Capital Gains Planning: Special divorce rules under IRC §121(d)(3) provide critical relief for ownership and use tests.
Divorcing homeowners in Florida face a complex intersection of state equitable distribution laws, federal mortgage guidelines, and significant tax implications when refinancing the marital home. The critical 6-month receipt/36-month continuation rule for support income often conflicts with standard 90-180 day refinancing deadlines in settlement agreements.
Meanwhile, current mortgage rates hovering around 6% represent more than double the pandemic-era lows of 2.65%, creating difficult financial decisions that can impact your family’s financial future for decades. This comprehensive guide provides factually accurate, Florida-specific information for divorcing parties navigating these challenges.
Florida’s Equitable Distribution Framework Governs Home Division
Florida operates as an equitable distribution state under Florida Statutes §61.075, meaning courts divide marital property in a manner deemed “fair” rather than automatically 50/50 as in community property states.
Equitable doesn’t mean equal. Courts begin with a presumption of equal distribution but may deviate based on ten statutory factors including contributions to the marriage, economic circumstances, duration of marriage, and the desirability of retaining the marital home for dependent children when equitable and financially feasible.
For the marital home specifically, real property held as tenants by the entireties is presumed marital regardless of funding source per Robertson v. Robertson (593 So. 2d 491, Fla. 1991). Common dispositions include:
- Outright sale with division of proceeds between spouses
- One spouse retains the home while the other receives offsetting assets
- Buyout arrangements where one spouse pays the other their equity share
- Exclusive possession granted to a custodial parent until children reach majority
The judgment distributing assets has the effect of a recorded deed under §61.075(4) when recorded in official records.
Florida’s Homestead Exemption: Three Distinct Benefits
Florida’s homestead exemption under Article X, Section 4 of the Florida Constitution provides three distinct benefits that are critical to understand during divorce:
- Up to $50,000 exemption from property taxes
- Save Our Homes cap limits annual assessment increases
- Portability allows transfer to new home
- Protected from creditors (with limited exceptions)
- Exceptions: mortgages, property taxes, mechanic’s liens
- Unlimited value protection for primary residence
- Protects surviving spouses and minor children
- Cannot freely transfer during marriage without consent
- Both spouses must sign conveyance documents
Florida Statutes §689.11 requires both spouses to sign any conveyance or encumbrance of homestead property, even if titled in only one spouse’s name. A spouse not on the deed still possesses constitutional homestead rights that must be addressed during divorce.
Removing a Spouse from the Mortgage Requires Refinancing, Not Just a Deed Transfer
The deed (determining ownership) and mortgage (determining loan liability) are entirely separate legal instruments—a distinction that causes significant confusion among divorcing couples.
Transferring title via quitclaim deed does NOT remove a spouse from mortgage liability. Both original borrowers remain legally liable to the lender regardless of what the divorce decree states or who currently holds title.
Primary Options for Removing a Departing Spouse
The retaining spouse obtains a new mortgage in their name only, paying off the existing loan with proceeds. This completely removes the departing spouse from liability.
- Requires independent qualification based on income, credit, and DTI
- Closing costs typically run 2-5% of loan balance
- Current rates (~6%) may significantly increase monthly payments
- May require waiting period if using support income to qualify
The lender agrees to release one borrower’s liability after the assuming spouse qualifies independently. This can preserve the original interest rate.
- Processing fees capped at $1,800 for FHA
- VA fees up to $1,200 in high-cost areas
- Assuming spouse must meet creditworthiness requirements
- VA entitlement considerations may apply
Voluntary release without refinancing is extremely rare in practice. Lenders have little incentive to release a borrower from liability.
- Requires significant equity and strong remaining borrower qualifications
- Most lenders decline these requests
- May require substantial documentation
- Not a reliable option for settlement planning
Garn-St. Germain Act Federal Protections
The Garn-St. Germain Act (12 U.S.C. §1701j-3) provides critical federal protection: lenders cannot enforce due-on-sale clauses for transfers between spouses “resulting from a decree of dissolution of marriage, legal separation agreement, or incidental property settlement agreement.”
This protection only prevents acceleration of the loan—it does not release the departing spouse from mortgage liability. Both parties remain on the hook until the loan is paid off or refinanced.
Risks of Deed Transfer Without Refinancing
- Credit damage from missed payments by the retaining spouse
- Foreclosure exposure despite having no ownership interest
- Deficiency judgment liability if the home sells for less than owed
- Impaired debt-to-income ratios affecting future borrowing capacity
Using Alimony and Child Support as Qualifying Income
Mortgage lenders distinguish between having income and having qualifying income—the latter requires meeting “continuity and stability” standards that many divorcing parties fail to satisfy.
The fundamental requirements across all major loan programs are:
- Documented history of receiving full, timely payments
- Expectation that payments will continue for at least three years from application date
Agency-by-Agency Requirements
| Agency | Court-Ordered Receipt | Voluntary Receipt | Continuation Requirement |
|---|---|---|---|
| Fannie Mae | 6 months | Not accepted | 3 years from application |
| Freddie Mac | 6 months | 12 months | 3 years from application |
| FHA | 3 months | 12 months | 3 years from mortgage |
| VA | 12 months | Varies | 3 years |
| USDA | 6 months | 12 months | 3 years from closing |
If child support terminates within three years (for example, when a 16-year-old turns 18), that income cannot be used for qualification. This frequently creates scenarios where by the time six months of receipt documentation accumulates, the three-year continuation requirement can no longer be met.
FHA and VA Loan Assumptions Preserve Pandemic-Era Rates
With current 30-year fixed rates at approximately 6.06% (Freddie Mac PMMS, January 2026) compared to the all-time low of 2.65% in January 2021, loan assumptions have become an increasingly valuable divorce planning tool.
Monthly Mortgage Payment Before and After Divorce Comparison Calculator
FHA Loan Assumption Process
All FHA loans are assumable with lender approval. For loans originated on or after December 15, 1989, the assuming spouse must meet creditworthiness requirements:
- Minimum 580 credit score
- DTI under 43%
- Housing payment under 31% of gross income
Upon approval, the lender must release the original borrower using HUD Form 92210.1. Processing must complete within 45 days, with maximum fees of $1,800 (increased from $900 in May 2024).
VA Loan Assumption Process
All VA loans are assumable regardless of whether the assuming party is a veteran. The critical distinction involves entitlement:
When a non-veteran spouse assumes a VA loan, the veteran’s entitlement remains tied to the property until the loan is paid off. This limits the veteran’s ability to use VA benefits for a new purchase. Only substitution of entitlement by another eligible veteran fully restores the selling veteran’s benefits.
VA Circular 26-23-10 (June 2023) simplified divorce-related transfers. If the veteran is awarded the property, the servicer can remove the civilian ex-spouse for a maximum $50 fee with only the divorce decree and recorded deed—no formal assumption required.
Tax Implications: TCJA Changes and Capital Gains Exclusion
Post-2018 Alimony Tax Treatment
The Tax Cuts and Jobs Act (TCJA) Section 11051 fundamentally changed alimony taxation by repealing IRC Sections 71 and 215, eliminating the alimony deduction effective January 1, 2019. The timing turns on when the divorce instrument was executed, not when it became final.
- Payer deducts alimony above-the-line on Schedule 1
- Recipient includes alimony as taxable income
- Both parties must exchange Social Security numbers
- $50 penalty for failure to comply
- Alimony is NOT deductible by the payer
- Alimony is NOT taxable to the recipient
- No reporting requirements for either party
- This change is permanent
Modifications to pre-2019 agreements retain the old tax treatment UNLESS the modification expressly provides that the TCJA amendments apply. Merely changing the alimony amount does not trigger new rules—the parties must specifically elect TCJA treatment.
Capital Gains Exclusion Planning
IRC Section 121 provides exclusions of $250,000 for single filers and $500,000 for married filing jointly on gain from sale of a principal residence.
Both tests must be satisfied:
- Ownership test: Own the home for 2 of the preceding 5 years
- Use test: Use as principal residence for 2 of the preceding 5 years
Special Divorce Rules Under IRC §121(d)(3)
A spouse receiving property in divorce can count the transferor’s ownership period toward meeting the ownership test.
If the ex-spouse is granted use of the property under a divorce decree, the non-occupying owner is treated as using the property as their principal residence during that period.
Transfers between spouses incident to divorce result in carryover basis—not stepped-up basis. The receiving spouse inherits potential tax liability on appreciation during the marriage.
A transfer is “incident to divorce” if it occurs within one year after marriage ends OR is related to cessation of marriage and occurs within six years per Treasury Reg §1.1041-1T(b).
— Treasury Regulations
Selling before divorce finalizes may allow claiming the full $500,000 joint exclusion. After divorce, each spouse is limited to $250,000 on their share of gain.
Working with a Certified Divorce Lending Professional
A Certified Divorce Lending Professional (CDLP®) is a mortgage professional trained through the Divorce Lending Association who understands the connection between divorce law, financial planning, tax implications, and mortgage financing strategies as they relate to real property.
How CDLPs Differ from Regular Loan Officers
CDLPs focus on whether the settlement structure will actually allow refinancing—not merely whether someone qualifies for a loan today. They collaborate with attorneys, mediators, and financial planners to integrate mortgage planning into the overall divorce strategy.
When CDLPs are not consulted until after settlement, parties frequently discover they cannot qualify for refinancing, resulting in court-appointed trustees selling homes at auction and credit damage that “could not be corrected by the divorce court.”
What CDLPs Can Identify Before Settlement
- Starting the clock on temporary support orders (critical for 6-month receipt requirement)
- Identifying title seasoning issues that affect refinancing
- Ensuring proper MSA language for rate/term versus cash-out refinancing classification
- Calculating realistic timelines based on income qualification requirements
Settlement Agreement Language Often Creates Impossible Timelines
Standard marital settlement agreements frequently include refinancing deadlines of 60-180 days that prove unrealistic when support income is needed for qualification.
The Fundamental Conflict
Courts require refinancing to protect the departing spouse, but mortgage guidelines require 6 months of support income receipt before that income can qualify the retaining spouse. These timelines are often mathematically incompatible.
Common Drafting Mistakes
| Mistake | Problem | Better Approach |
|---|---|---|
| Arbitrary 90-day deadlines | Mathematically impossible if support income needed | Use 6-9 month timelines with CDLP consultation |
| Assuming decree equals release | Settlement language cannot bind the lender | Include indemnification language (while acknowledging limitations) |
| Missing rate/term language | May limit equity access to 80% LTV | Specify “Equity Buy-Out Rate and Term refinance” language |
| No fallback provisions | Chaos if refinancing fails | Include forced sale parameters, listing price, agent selection |
| Ignoring credit timelines | Divorce often damages credit temporarily | Allow 6-12+ months for credit rebuilding |
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Listen NowConclusion: Integrate Mortgage Planning Early in the Divorce Process
Successful refinancing during Florida divorce requires navigating the intersection of state equitable distribution law, federal mortgage guidelines, tax implications, and current market realities. The disconnect between typical 90-180 day refinancing deadlines and the 6-month support income documentation requirement represents the most common failure point.
Action Items for Divorcing Homeowners
- For attorneys: Coordinate early with CDLPs to prevent creating impossible refinancing obligations
- For homeowners with FHA/VA loans: Explore assumption options to preserve pandemic-era rates worth thousands annually
- For all parties: Remember IRC §1041’s carryover basis means the receiving spouse inherits future tax liability—not just present equity
- Consider timing: Selling before divorce finalization may preserve the $500,000 joint capital gains exclusion
The current rate environment, with 30-year mortgages at roughly 6%, makes these considerations more consequential than at any point in recent history. A 2021 mortgage at 2.65% is now a valuable marital asset in its own right—one worth preserving through assumption rather than sacrificing through refinancing when circumstances permit.
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