Refinancing After a Divorce

Divorce is a difficult experience for everyone involved, and the details of sorting out property can be overwhelming. One of the items you will likely have to deal with is the refinancing of your home if both people were listed on the mortgage. How and when this happens will depend on the terms of your divorce.

Refinancing To Remove An Owner

In the event that one of the previous spouses will retain ownership of the home, it will be refinanced to a new loan that is solely in that person’s name, removing the other party’s liability for the mortgage and property.

This can usually be done in a straightforward manner. The new sole owner will take out a loan and pay off the previous loan in the process. In this case the closing costs will be the responsibility of the new sole owner. Once the refinance is complete the other party will no longer be responsible legally for the mortgage or the home itself.

If there is any equity in the property, and cash is taken out during the refinance, the courts will determine how this is distributed during the divorce proceedings. It may be split or belong to one party or the other.

Divorce And Credit

In some cases, divorce can be hard on a person’s credit. This is especially true if there were a lot of debts incurred during the marriage or if a bankruptcy becomes part of the proceedings. A former spouse’s debts can continue to damage your credit for a while after the divorce is final.

This can make the refinance a little more difficult since it will affect credit and thus interest rates. Talk to your mortgage broker regarding the potential impact of your divorce on your credit and determine the best way to approach the refinance.

Who Pays The Mortgage

If child support or alimony is involved in the divorce, one party may continue paying part or all of the mortgage even though they no longer live in the house. This doesn’t mean that it can’t be refinanced out of that person’s name.

This matter should be determined as part of the divorce proceedings, and the home refinanced in accordance with the judge’s determination. Many mortgage brokers are experts in dealing with divorces, refinances, and their repercussions. It makes sense to talk with someone both during and after your divorce so that you know what your options will be.