Mortgage Refinancing after Divorce
The weeks following a divorce might sound like the worst time to refinance a mortgage. Many people are still struggling emotionally from the end of their marriage or are just trying to adjust to life on their own. Do you really want to go through a refi at this time?
The fact is, however, that many people must refinance their home. This might be the only way to get your spouse off the mortgage, for example. If you get the family home (and the mortgage) after divorce, removing your spouse makes sense so that he or she is no longer responsible.
There might be other reasons to refinance. For example, you might want to get a lower interest rate to help you make your payments now that you are living on one income. Whatever your reason, refinancing after a divorce requires careful planning.
Agree to How Much Your Home is Worth
You will need to determine how much the home is worth so you can properly value your spouse’s share if you are buying them out. Of course, this valuation might have been done as part of the divorce. If not, you and your ex need to decide on a value.
Probably the best way to reach a number is to have the home appraised. It will cost you around $400-500 to get a professional appraisal. Using an appraiser takes the mystery out of the process and is easy for two exes who can’t agree. Another option is to look at the assessed tax value, but that does tend to be low.
The refi process is not terribly different when doing it after divorce. You will need to pull together the following documents:
- Proof of income
- Tax returns for the past two years
- Credit report
- Statement of outstanding debt
- Statement of assets
Take a moment to review your credit history before applying. Many people have errors, which you can get fixed by contacting the credit reporting bureau that has the inaccurate information.
Of course, you need to be realistic of your ability to get approved. Remember, you are seeking a refi on only one income. This might be a problem, depending on your credit and employment history. Talk to your Media divorce lawyer if you have questions about your creditworthiness.
Check Interest Rates
If you are refinancing to buy out an ex, you’re at the mercy of interest rates. Most people refi so that they can get a lower rate. But your initial mortgage rate might be lower than any current rate on offer, in which case your monthly payment will increase.
Take a careful look at your budget. If you can’t afford your home, you probably won’t get approved for a refi. The best option might be to sell the home and divide the equity, as painful as that might be. Selling also comes with hassles, however. Your ex might have endless opinions about the asking price and whether you should accept an offer.
Let Us Help You think Through Your Options
Barbara Flum Stein & Associates understands how divorce can impact your housing situation. To talk with our Media divorce lawyer, please contact us today.