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How to Refinance a Home After Divorce

9 min read
Philip Ahn, Attorney

by Philip Ahn, Attorney

If there is a mortgage on the home, both parties may decide to refinance the house after the divorce. Consulting your lender is crucial to find out what their specific requirements are. You may need to pay closing costs or provide additional documents, such as a divorce settlement agreement or proof of income. 

Once you have the requirements, you must determine your credit score and financial situation. Keeping your credit score in good condition is essential, as this will impact the interest rates you can get on a new loan. You will also need proof of income, such as a job or other forms of steady income.

Mortgage Payments After Divorce

A few reasons to refinance your mortgage following a divorce are as follows:

  • To remove yourself or your spouse from the mortgage
  • To change the terms of the existing mortgage
  • To refinance and consolidate two mortgages into one

A new mortgage following a divorce can present unique challenges. Divorce can have a significant impact on your finances, including the monthly payment of your mortgage.

The divorce settlement terms determine the handling of mortgage payments. Sometimes, the spouse remaining may be solely responsible for making payments for the remaining money and keeping the house as the primary residence. In other situations, both spouses will pay.

If a former spouse has missed payments or has damaged your mortgage credit history, refinancing after divorce might be the best option. It can help you get rid of joint mortgage debt.

Dealing With The Mortgage Lender

After a divorce, dealing with a mortgage lender can be difficult. It’s important to remember that professional help is available and can make the process easier. A mortgage professional can help review documents, discuss a few options, and provide advice on dealing with a mortgage lender post-divorce.

Knowing the different options available when dealing with a lender after divorce is essential. If both parties agree, they can each pay half the mortgage balance amount.

A mortgage loan refinancing happens in one spouse’s name only. This option may also involve adjusting the mortgage payment amounts and loan terms.

The lender may also allow a mortgage transfer ownership, where the other spouse’s liability ends and their name is no longer associated with the loan. For instance, the former spouse keeping the house may refinance the mortgage to remove the departing spouse from liability.

Quitclaim Deed Transfer

A quitclaim deed is one of the most commonly used refinancing methods after divorce. It is a document used to transfer a person’s interest in real estate from one person to another. It releases a person’s interest in the property but provides no warranties as to title or ownership. Refinancing after divorce with a quitclaim deed may allow one spouse to own the home and make all future mortgage payments.

Getting Enough Cash From Home Equity Loan To Buy Out The Other Spouse’s Share Of The Property

Enough equity in the property can make refinancing

after divorce a viable option. A home equity loan is an excellent option for homeowners who want to buy out the ex-spouse’s share of the property. 

This type of loan leverages the home’s equity to secure a loan, allowing you to purchase the ex-spouse’s stake in the property. It is important to note that this type of loan should be used only by those who can afford to make timely payments and have a good credit history.

To secure a home equity facility, the homeowner must provide documentation that details the following:

  • Current home value
  • Property tax statements
  • Debt-to-income ratio
  • Monthly debts
  • Credit report
  • A professional appraisal.

The lender will then review the documents to determine the new loan amount and interest rate. Following a divorce, refinancing a home loan can be an important step in creating financial security after a divorce.

Divorce Decree Impact On Refinancing After Divorce

A divorce decree is a court order that documents the specific terms of a divorce. The first step in assessing the impact of the court order on refinancing is to ensure that all terms of separation and division of assets are fully understood, including the division of property, debt, and other financial assets.

Depending on the specifics of your decree, you may have restrictions on refinancing without the other spouse’s consent. Once you fully understand the terms of your decree, it is important to consider how any refinancing would affect you and your ex-spouse.

Other typical elements of a divorce decree include:

  • Spousal support
  • Retirement funds
  • Instructions to pay alimony to the other spouse
  • Child support payments

Names In The Home Loan Following A Divorce – Stake Your Claim!

A former spouse’s name might remain on a mortgage loan following a divorce if the mortgage takes place before the marriage dissolution. During a divorce, it is vital to ensure that names are formally taken off or added to the home loan to account for each party.

Both parties may often decide to keep their name on loan after a divorce for financial or sentimental reasons, and it is important to understand the implications of doing so. The responsibilities of each party must be detailed in writing and agreed upon by both parties.

Erasing One-Partner From Home Loan Mortgage Payments

The process can be daunting and complicated if you want to remove your former spouse from the original mortgage. But with the proper knowledge, it’s possible to do so without too much hassle. Removing one spouse’s name from a mortgage loan may benefit both parties, particularly if the other spouse has difficulty managing payments or would like to refinance.

Safeguarding Your Credit Score After Divorce

Divorce can be a difficult and emotional experience, but it’s essential also to consider the financial implications of divorce. One critical financial aspect is your credit score, which the divorce process can adversely impact. To ensure that your credit score is not negatively affected, taking the necessary steps to protect it is essential.

Ensure you understand what

debts are in your name and how to divide them during the divorce proceedings. It’s essential to keep a detailed record of all accounts, who is responsible for them, and any payments where you are a co-borrower. Make sure all payments are made on time and in full, as late payments can affect your credit score.

Weighing Refinancing In The Wake Of Divorce Agreement

After divorce, refinancing the home loan can be complex, especially if an ex-spouse is on a loan. In some cases, refinancing after divorce may be the only option to remove a spouse from the loan or to improve refinancing terms.

The person refinancing after divorce will want to take their time and weigh all their divorce mortgage options before refilling.

Current Mortgage Refinancing After Divorce

When a married couple divorces, one primary consideration is family home ownership. One spouse may refinance the mortgage or deed the home over to the other spouse. In either case, refinance after divorce can be a complicated process.

If you are considering refinance after divorce, there are a few essential things to consider. First, reviewing the terms of your existing mortgage and refinance agreement is vital. If both spouses are co-borrowers on the original loan, removing one of the names and completing the paperwork is mandatory in divorce refinancing

Retain Your House And Mortgage After Divorce: An Alternative Solution

Divorce can be an emotionally and financially challenging experience. Many couples worry about what will happen to their marital home and mortgage during separation, but professional solutions are available to help them preserve their assets.

Retaining your house and mortgage after divorce is possible if both parties agree to a professional solution allowing one person to remain in the home while ensuring both parties get an equitable share of their equity.

Through negotiation, the parties can create an arrangement that protects their rights and preserves the marital home.

Community Property States

Refinancing a mortgage after a divorce can be complicated, particularly if you live in one of the nine community property states. These states’ laws dictate that all assets and debts should be divided equally between the two parties.

Cash Out Refinance After A Divorce Agreement

Cash-out refinances are also available for homeowners who want to access the equity built up in their homes. With a cash-out refinance, you can borrow up to 80% of the appraised value of your home.

Alternate Ways To Refinance Your Mortgage Post-Divorce

The remaining spouse can refinance their property after a divorce, especially if the ex-spouse was also on the original loan. After a divorce, there are several viable options to mortgage refinancing that can help you save money and maintain financial stability.

Explore loan modification programs with your current lender or other lenders for better interest rates that fit every budget. Moreover, these alternatives will allow you to control how much debt you become responsible for while also helping protect your credit score in the long run.

Refinancing A House After Divorce FAQs

If you seek answers about refinancing a house after divorce, the following FAQs should help.

How Much Are Divorce Refinance Closing Costs?

Divorce refinance closing costs vary by lender, and professional advice is necessary when considering a divorce refinance loan. Generally speaking, closing costs typically include the following:

  • An origination fee
  • Appraisal fees
  • Title search and insurance fees
  • Document preparation fees
  • Notary costs

Other fees may be applicable depending on the lender and your financial situation. Researching and comparing different lenders’ charges is essential to ensure you get the best deal.

Can You Take A Name Off A Mortgage Without Refinancing After Divorce?

Removing a name from a mortgage without refinancing a conventional loan is possible. This process, known as “mortgage assumption,” transfers the obligations of a mortgage from one borrower to another.

If the current lender agrees, an Assumption of a Mortgage can happen. So it is essential to consult with them about the process and any requirements they may have. Additionally, the individual assuming the loan will likely need to provide proof of financial stability, along with any other documents that may be required.

The process will be complete upon approval from the current lender, and a new borrower can take over the new mortgage.

The remaining spouse in an FHA loan refinanced after divorce must submit a request for loan assumption. The ex-spouse must sign off on the refinancing and provide information verifying their loan termination.

What Should I Do If I’m Unable To Refinance After Divorce?

Professional financial advice is vital if you cannot refinance due to credit issues after a divorce. Credit counselors can help evaluate your situation and offer potential strategies to improve your credit, including working with creditors to restructure or consolidate debt or setting up a budgeting plan.

Additionally, some financial institutions may offer second-chance loans to those with a less-than-perfect credit rating.

Get Advice On House Refinance After Divorce

After a divorce, the last thing you want to deal with is refinancing your house.

The mortgage terms you agreed to when you married may no longer fit your financial needs after a divorce. The process of refinancing your house can be long and complicated. You may not know where to start or what to do.

A mortgage planner can walk you through the entire refinancing process, ensuring everything goes as smoothly as possible so you can focus on moving on with your life.

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