Divorce and home ownership in Maryland often collide in one expensive sentence: “To remove one spouse from the mortgage, the loan has to be refinanced.”
For many divorcing couples, that sentence becomes one of the biggest financial obstacles in reaching a fair settlement.
When interest rates are higher than when the home was originally purchased, refinancing can mean a significantly larger monthly payment, higher total interest paid over time, additional closing costs that reduce available equity, and pressure to sell the home even when neither spouse wants to.
Maryland’s new law (HB 1018 / SB 689, effective October 1, 2025) is intended to reduce that “forced refinance” problem in certain divorce situations by creating a clearer path for one spouse to keep the existing mortgage terms — including the interest rate — if they qualify.
For divorcing homeowners across Annapolis, Anne Arundel County, Howard County, Montgomery County, Harford County, Baltimore County, and surrounding areas, this law may provide a meaningful option when negotiating what happens to the marital home.
For professionals involved in divorce financial planning, including Certified Divorce Financial Analysts (CDFAs), understanding how this law works can help divorcing spouses evaluate whether keeping the marital home is financially realistic.
The Big Benefit in Simple Terms
· One spouse may be able to keep the current mortgage interest rate
· The mortgage may remain in place rather than being replaced by a refinance
· The other spouse may be removed from mortgage liability if the lender approves the assumption
· Divorcing spouses may avoid major payment increases caused by refinancing
For many households, the difference between keeping a mortgage with a 3–4% rate and refinancing into a much higher rate can mean hundreds or even thousands of dollars per month.
Why This Is a Big Deal in Maryland Right Now
Across Maryland, housing markets in areas such as Columbia, Ellicott City, Rockville, Bethesda, Severna Park, Crofton, Annapolis, Bel Air, and communities throughout Harford County and Baltimore County have experienced strong home value growth.
Many homeowners purchased or refinanced their homes during periods of historically low interest rates.
During divorce, this often creates a difficult financial situation where one spouse wants to remain in the home while the other spouse wants their equity and removal from the mortgage.
What the Law Does
· One spouse may apply to assume the mortgage
· The existing mortgage terms — including the interest rate — may remain unchanged
· The other spouse may be released from mortgage liability once the assumption is approved
· The spouse keeping the home must still qualify under the lender’s underwriting guidelines
The law does not guarantee approval and does not eliminate normal underwriting requirements.
Eligibility Reality Check: Not Every Loan Qualifies
· FHA loans
· VA loans
· USDA loans
· Mortgages held by certain national banks or federal credit unions
Because many divorcing homeowners assume the law automatically applies to their situation, confirming loan eligibility early can be extremely helpful—especially in markets like Montgomery County, Howard County, Anne Arundel County, Harford County, and Baltimore County where home values and mortgage balances are substantial.
How a Spouse May Qualify to Assume the Mortgage:
Although HB 1018 / SB 689 creates a pathway for mortgage assumption in certain divorce situations, a spouse must still meet lender requirements before the mortgage can be transferred.
In most cases, qualification will depend on several factors, including:
• Income verification
The spouse keeping the home must show sufficient income to afford the mortgage payment independently.
• Debt-to-income ratio (DTI)
Lenders will typically evaluate whether the mortgage payment fits within acceptable debt-to-income guidelines.
• Credit history
The remaining spouse must generally meet the lender’s credit requirements.
• Court-ordered property transfer
The mortgage assumption must usually be tied to a divorce decree or separation agreement that awards the home to one spouse.
• Lender approval of the assumption
Even under HB 1018 / SB 689, the mortgage lender must still approve the transfer before the departing spouse can be released from liability.
If these requirements are met and the mortgage qualifies under the law, the lender may allow the remaining spouse to assume the existing mortgage and keep the current interest rate rather than refinance. Because lender requirements and loan types vary, reviewing the mortgage details early in the divorce process can help determine whether assumption may be possible.
3 Case Studies (Fictional, Maryland-Based)
Case Study 1 — Annapolis / Anne Arundel County
Problems:
· Refinancing the mortgage would significantly increase the monthly payment
· The higher payment could make it difficult for the remaining spouse to qualify
· Selling the home would disrupt the children’s school situation
· The departing spouse wants their equity and removal from the mortgage liability
How the New Maryland Law May Help
Maryland’s new mortgage interest rate law may allow the remaining spouse to assume the existing mortgage instead of refinancing. This could allow the lower interest rate and current payment structure to remain in place while removing the departing spouse from mortgage liability if the lender approves the assumption.
Outcome / Solution:
· The lower interest rate may remain intact
· The monthly payment may stay close to its current level
· The departing spouse may be released from mortgage liability once approved
Case Study 2 — Howard County (Columbia / Ellicott City)
Problems:
· Refinancing would increase the monthly payment beyond affordability
· The spouse remaining in the home may not qualify for refinancing
· Selling the home would force the family to give up a property they would prefer to keep
· Both spouses still need a fair and equitable division of the home’s equity
How the New Maryland Law May Help
Under Maryland’s new mortgage interest rate law, certain qualifying mortgages may allow a spouse to assume the existing loan rather than refinance it. This may allow the current mortgage terms and interest rate to remain unchanged if the remaining spouse qualifies with the lender.
Outcome / Solution:
· The mortgage may remain in place under the current terms
· The lower interest rate may be preserved
· The home can remain in the family while the equity is addressed through other marital assets
Case Study 3 — Montgomery County (Rockville / Bethesda)
Problems:
· The mortgage lender may not fall under the category covered by the new Maryland law
· Assumption approval is not guaranteed
· Transferring ownership without addressing mortgage liability could leave the departing spouse financially exposed
· The settlement could collapse if assumption is denied without a backup plan
How the New Maryland Law May Help
Even when coverage under the law is uncertain, Maryland’s new mortgage interest rate law highlights the possibility of mortgage assumption in divorce situations. This allows divorcing spouses to explore keeping the existing mortgage rate before resorting to refinancing or selling the home.
Outcome / Solution:
· Assumption may still be attempted through the lender
· Underwriting requirements can be evaluated early in the process
· A backup plan can be created if the assumption request is denied
Key Takeaways and Final Thoughts
· HB 1018 / SB 689 may allow some divorcing spouses to keep an existing mortgage interest rate instead of refinancing
· Preserving a lower interest rate can be the difference between keeping the home or being forced to sell
· The spouse assuming the mortgage must still qualify under lender underwriting standards
· The law does not apply to every mortgage, so confirming loan eligibility early is important
· Even when the law does not apply directly, some lenders may still allow mortgage assumptions
For divorcing homeowners in areas such as Annapolis, Anne Arundel County, Howard County, Harford County, Baltimore County, and Montgomery County, preserving an existing mortgage rate can significantly affect the financial outcome of a divorce settlement.
The marital home is often one of the largest and most emotionally significant assets involved in divorce. When refinancing becomes the only available option, higher interest rates can make it extremely difficult for one spouse to keep the home even when both parties might prefer that outcome.
Maryland’s HB 1018 / SB 689 introduces a potential alternative by allowing certain divorcing spouses to pursue a mortgage assumption rather than refinancing. While the law does not guarantee approval in every situation, it provides an important additional option that may help some families maintain housing stability while still reaching a fair financial settlement.
As divorce laws and financial planning continue to evolve, understanding changes like Maryland’s mortgage assumption law can help divorcing spouses make more informed decisions about one of their most important assets — their home.
Steven F. Bryant Disclaimer: As a Certified Divorce Financial Analyst I am unable to provide legal advice, please make sure you do not take this article as legal advice. Also consider that this is article was comprised from my experience and opinion in the industry, facts listed in this article may not apply to all cases.