You may have to give up many things in a divorce, but if you live in Maryland, your mortgage might not be one of them. A new state law allows a spouse to assume an existing mortgage. For homeowners with low-interest mortgages, this can mean significant savings.
“It really becomes a huge financial burden if you have to refinance,” says Jeffrey Landers, a divorce financial specialist and CEO of national insurance agency Hello Monthly Income.
[Read: Best Mortgage Lenders]
How Maryland’s New Law Protects Your Low Mortgage Rate During Divorce
Refinancing has long been the main option used by divorcing couples to remove one spouse’s name from a mortgage. However, homeowners who locked in a mortgage when rates dipped below 3% may find their interest rate doubles if they refinance now.
Although the Maryland law doesn’t apply to all mortgages, divorce experts say it’s a positive change and one that other states should consider following. The Maryland law was passed last year and went into effect on Oct. 1, 2025. It applies to divorces finalized on or after that date, covering new and preexisting conventional mortgages.
The law’s provisions include the following:
— A person awarded ownership of a home in a divorce can ask the lender to let them assume the current mortgage in their name only. This would remove the other person without the need to refinance the loan.
— The law applies to both new and existing mortgages for properties owned for personal or family use. Loans approved after Oct. 1, 2025, must include a clause allowing a spouse to assume the mortgage, while older loans will be treated as if they include this clause.
— Only conventional mortgages are covered by the law, which means FHA, VA and USDA home loans are not.
— The law does not apply to loans made by national banks and federal credit unions since those institutions are regulated by the federal government and not state law. It specifically applies to Maryland-chartered banking institutions, credit unions, mortgage lenders, mortgage lending businesses and mortgage loan originators.
— The law requires that lenders inform borrowers in writing of their right to divorce-related assumption before completing the loan application.
The Maryland Office of Financial Regulation notes that approximately 65% of mortgages in the state are federally backed and typically already permitted divorce-related assumptions under Fannie Mae or Freddie Mac guidelines. This law targets the remaining 35% of the market that previously lacked a statutory right. Based on Home Mortgage Disclosure Act data from 2024, this would impact roughly 21,700 loans annually.
The Equity Buyout Challenge: How to Fund a Mortgage Assumption
The caveat is that the person assuming the loan has to qualify for it. “It’s not like all of a sudden you don’t have to have good credit,” says Tina Sharma, managing partner of the Law Offices of Tina Sharma in Maryland.
A mortgage company doesn’t have to let a person assume a loan if they don’t meet the lending criteria. To make that determination, a lender might look at someone’s income, credit score and debt-to-income ratio, among other things.
The other wrinkle in assuming a mortgage is that any equity in the property generally needs to be split by both spouses.
“Typically, what you’d see is that if someone is assuming the mortgage, they have to come up with cash to buy out the other spouse,” says Kirk C. Stange, founding partner and president of Stange Law Firm, which handles family and divorce cases in 10 states. “That could be problematic.”
If a person doesn’t have cash to buy out the other spouse, there could be some “horse trading,” according to Landers. In other words, the spouse assuming the mortgage may give up other assets in exchange for the equity in the property.
[Read: Best Mortgage Refinance Lenders.]
Why This Change Makes Getting Divorced Easier and Safer
Maryland’s new law means mortgage companies will miss out on the extra revenue they would collect if a homeowner refinanced at a higher interest rate, but otherwise, there is little downside.
“It really makes it a lot easier to get divorced,” Sharma says. “You had to refinance (before) so people would feel stuck.”
The law also reduces the chances of an ex-spouse having their credit impacted by a property they no longer own. This can happen when the other spouse doesn’t follow through on an agreement.
“There might be a request to refinance within a certain period, but they don’t,” Stange says.
Or, an ex-spouse might have agreed to keep their name on the mortgage so the other person didn’t have to refinance at a higher interest rate. Either way, if the person who remained in the home starts making late payments or if the property goes into foreclosure, it will impact the credit of everyone listed on the mortgage.
The Maryland law reduces the chance of this happening by making it easier for the departing spouse’s name to be removed from the loan.
Beyond Maryland: Is California Next for Mortgage Divorce Reform?
Right now, Maryland is the only state in the nation with this law, but it will be joined next year by California. AB 3100 was passed and enacted in 2024 and goes into effect on Jan. 1, 2027. The California law is similar to Maryland’s, with one significant difference.
“It doesn’t cover existing mortgages, which isn’t that helpful,” Landers says. “Maryland’s (law) is a little bit better.”
In California, the law doesn’t apply to existing loans and only covers conventional mortgages originated on or after Jan. 1, 2027. Only owner-occupied residential properties with four or fewer units qualify.
As for whether other states will follow suit, “I think this statute would be a good thing for other states to look at, for sure,” Stange says.
Sharma believes they will likely watch and see how the system works in Maryland first. However, she is hopeful the law will spread elsewhere in the country. “I hope it does,” she says. “It empowers people.”
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Maryland and California Pass New Laws to Protect Your Low Mortgage Rate in a Divorce originally appeared on usnews.com
