Refinancing Options Before or After a Divorce
Divorcing when you share a mortgage with someone sounds like a challenge, but there are plenty of options available. If you’re looking to take full ownership of your current home before or after your divorce, one of the cleanest ways to go about this is to refinance the mortgage.
Refinancing Before a Divorce
Looking into refinancing before your divorce will help you determine if the payments will be manageable for you. Plus, interest rates are constantly changing. If your divorce has the possibility of dragging on, you might be looking at much higher interest rates after the process is over.
Refinancing After a Divorce
After your divorce, beginning the refinancing process is an efficient way of removing your spouse’s name from the mortgage. Beginning the process after your divorce is finalized will also give you a better idea of what you will be able to afford with one income.
If your home is valued at $250,000 with a mortgage balance of $200,000, that means you and your spouse have $50,000 equity in the home. If your divorce includes splitting assets evenly, you and your spouse will each have $25,000 equity in the home. So, if you’re hoping to have full ownership, you’ll have to buy out your spouse.
Unless you have $25,000 lying around in cash or other assets, you’ll need to find an alternative payment option in order to buy out your spouse’s share of the home.
This is a common refinancing option for those needing to buy out their spouse. With this process, you refinance your mortgage for more than you currently owe and take the difference in cash. So, if you owe $200,000 on your home, you’d take out $225,000 and give your spouse the extra $25,000 so you can buy out their share.
Not Divorced Yet? No Problem!
Blue Water Mortgage can help you even if you’re aren’t fully divorced yet. We accept minimal documentation to start the process of refinancing. Whether it’s refinancing your current home or finding a mortgage for a new one, our team can help you regain your independence.
Frequently Asked Questions
My ex-spouse got our home in the divorce, but my name is still on the mortgage. Do I have to factor that housing expense in my debt ratio when going to buy another home?
What is cash-out refinancing?