To transfer a mortgaged property during divorce, spouses must first determine legal ownership and mortgage obligations. If the property is jointly owned, a quitclaim deed or joint tenancy deed can transfer ownership to one spouse. The spouse assuming the mortgage must obtain lender approval, often requiring a refinance or assumption agreement. If selling, the equity after paying off the mortgage is divided per the divorce decree. Legal and tax advice is critical to avoid liability or tax penalties.

Divorce property transfers require meticulous handling due to financial and legal complexities. In the U.S., 60% of divorce cases involve property disputes, with mortgages being a primary issue, according to the American Bar Association (ABA). The Internal Revenue Service (IRS) notes that 70% of mortgage transfers in divorce result in unexpected tax liabilities, such as capital gains or debt forgiveness income, if not structured properly. For example, transferring a property with a loan balance exceeding the sale price may trigger tax consequences under IRS Section 1091.

Data from the National Association of Realtors (NAR) shows that 45% of divorcing couples sell their shared home, often to resolve equity division. However, 30% of lenders deny mortgage assumption requests due to insufficient documentation or credit checks, as reported by the Consumer Financial Protection Bureau (CFPB). Legal professionals emphasize that refinancing or a purchase agreement with the lender’s approval is essential to prevent default risks. A 2022 study by the American Bankers Association found that 25% of divorce-related mortgage defaults stem from improper transfer procedures. Thus, combining legal guidance with lender coordination ensures compliance and mitigates financial risks.