Most assets in a divorce can be easily divided. A home is one of the more complicated ones since a mortgage is tied to it. A spouse can’t simply be removed from the mortgage. A new mortgage must be obtained (without that specific spouse) with those funds used to pay off the old mortgage. Here are a few helpful tidbits of information if you will be refinancing a home after divorce.
Qualifying for the New Mortgage
Qualifying for the new mortgage may be a challenge. Lenders will evaluate whether your income is sufficient to cover the mortgage and other debts in your name. If you’re like most divorcees, your credit score may have also taken a hit as a result of the divorce. What many divorcees end up doing is obtaining a co-signer. A direct family member, such as a parent or sibling, is usually best.
Proceeds from the Refinance
As part of your divorce agreement, you and your ex-spouse may have agreed to divide the equity in the home. If you are responsible for paying out a certain amount of equity, then you may need to refinance the mortgage for more than the existing balance. You do not necessarily need to cash out your portion of the equity, but you will need to cash out the amount due to your ex-spouse.
There are costs associated with refinancing a mortgage. Will you be covering that expense yourself or will it be split with your spouse? Hopefully this was determined in your divorce agreement. Since your ex-spouse will benefit from the refinance (in having his/her name removed from the debt and possibly getting a cash-out of the equity), it seems that you both should share in the expense.
Updating the Deed
As part of hte refinance, a new deed will be recorded to replace the old deed. Since your ex-spouse is part owner of the home, he/she will need to sign off on that deed that removes his/her name. If you have a family member co-signer, speak to your attorney about how that family member is listed (if at all).
More on Refinancing a Home After Divorce
Refinancing a home after divorce is one of many complications that your MA divorce attorney can provide guidance on. Every divorce is unique based on the assets and other circumstances involved. Contact our team for a free initial consultation on your divorce needs.