Divorce comes with plenty of challenges—and if you or your former spouse has a VA loan, it can complicate things even further.
At Commander Mortgage, we understand that going through divorce is difficult, which is why we put together this guide to help you understand how the process may impact VA loan management. When you have a handle on these concepts, you’re better equipped to protect your financial future, whether you're a veteran or a non-veteran spouse.
Below, find everything you need to know about VA loans and divorce to navigate this difficult time with clarity and confidence.
VA loans are an incredible tool available exclusively to veterans and active-duty service members. Backed by the U.S. Department of Veterans Affairs, they put homeownership within reach thanks to the following benefits:
To qualify, you must meet service requirements and obtain a Certificate of Eligibility (COE). Learn more about VA loan eligibility.
Divorce can throw your entire life for a loop, both emotionally and financially. That includes your loan management—especially if both spouses are listed on the mortgage and title.
Here are some key factors to consider:
There are several options when it comes to managing your VA loan during divorce. Here are a few things to keep in mind:
Many people choose to sell their home during divorce. You can divide the money made from the sale according to the divorce agreement.
Once the home is sold and the VA loan is paid off, the veteran can apply to restore full entitlement, allowing them to use their VA loan benefits again.
2. Refinancing the Mortgage
If you or your spouse want to keep the home, you’ll likely have to refinance your mortgage. The veteran may refinance into a new VA loan or a conventional mortgage in their name only. However, the non-veteran cannot use a VA loan. Instead, they can refinance into a conventional loan if they want to continue living in the home.
As we noted above, a non-veteran spouse is unlikely to be able to assume a VA loan during divorce. However, it is sometimes possible under special conditions, with lender and VA approval. The assuming spouse must also meet income and credit requirements. Additionally, unless the veteran receives a release of liability, they may still be held responsible if payments are missed.
Release of liability is a critical step if the veteran is not keeping the home. This removes the veteran from legal responsibility for the mortgage, and it must be requested through the lender. Approval is based on the ex-spouse's ability to qualify for the loan independently.
VA loan entitlement is the amount the VA guarantees on a home loan. This number can be impacted by divorce, especially if the loan remains active or shared between spouses.
If the loan remains active, part of the entitlement stays tied up. But if the home is sold and the loan repaid, the veteran can apply for full entitlement restoration.
Need help with the process? Commander Mortgage has you covered. We can help you evaluate your entitlement status and file the necessary paperwork with the VA.
One key aspect of VA loans is the fact that the veteran borrower must live in the home they purchase with their loan as their primary residence. Divorce can put borrowers in a sticky situation—but there are ways to navigate this issue.
If the veteran moves out during the divorce, the occupancy requirement can still be satisfied if a spouse or dependent remains in the home.
After divorce, however, if the non-veteran spouse keeps the home, occupancy rules may come into question. For this reason, it’s always best to consult your lender to figure out the best way to go for your specific situation, and to avoid any compliance issues.
Divorce is never easy—but when a VA loan is involved, a new layer of complexity comes into play. That’s why it’s especially essential to have professionals who understand the unique legal and financial considerations on your side.
Family law attorneys with VA loan experience can help draft fair settlements. Meanwhile, mortgage professionals like Commander Mortgage can assist in evaluating refinance options, loan assumptions, or entitlement restoration.
At Commander Mortgage, we specialize in VA loans—and we understand the challenges that come with managing a VA loan during a divorce. Our team is here to help you understand your remaining entitlement; assist with loan assumptions, releases of liability, and refinancing; and guide you through occupancy and legal requirements with confidence and ease.
Divorce can complicate VA loan ownership, but with the right guidance, you can make informed decisions that protect your finances and your future. Need help navigating your VA loan during divorce? Contact Commander Mortgage today for a free consultation with a VA loan expert.
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