Getting divorced is a stressful time in life. Whether your marriage was basically good but just didn’t work out or there were significant problems in it, it can still be hard to let it end. There’s also a lot to do during a divorce, and the list can get longer when you own a home. If you’re keeping the house while your spouse moves out, you may need to get a refinance mortgage loan. That way the house can be just in your name, instead of belonging to both of you. But you’ll have to qualify and go through the closing process. Here are seven tips to help you get a refinance mortgage during a divorce.
1. When will your divorce be final?
If your divorce is going to take a long time, you may not be able to technically refinance until it’s final. You and your spouse are basically the sellers of the home, with you alone as the buyer. Because of that, you may not be able to refinance the house into your name only if you’re still married. Different states have different rules on that, so check with your lender or a real estate attorney to make sure you understand the process. You don’t want to start the process when you’re still married if you can’t close on the house in just your name until the divorce has been finalized.
2. Why do you have to qualify when you already own the house?
Anytime you refinance a house, you need to qualify with the lender you’re getting the loan from. That way the lender knows you have a good chance of being able to afford the house, and you can feel confident with the payment you’ll have, too. Especially during a divorce, you’ll have to qualify on a refinance because it will be based on just your income and information, instead of adding your spouse’s income to the equation, as well. If you can’t qualify on your own you may need to locate a cosigner or make other arrangements before you can refinance.
3. Does alimony or child support count?
Refinancing your mortgage when you’re going through a divorce means you have to qualify on your own, so you’ll want to work with your lender to find out the best option for a loan that will work for you. One of the things that can boost your income is declaring how much you receive for alimony or child support. You can use those amounts as part of your income, as long as you have a court order for them and they will be continuing for a number of years. That can be a great way to help you show more income to your lender, so you have a better chance of getting a refinance mortgage loan in your name.
4. Are you buying out your spouse’s portion of the home’s value?
If you and your spouse bought the house together and have lived in it for a while, you are both invested in that particular piece of property. That means you may need to “buy out” your spouse’s portion (usually half of the current value) of the house when you refinance. However, there can be extenuating circumstances, and you may not need to give your departing spouse a large chunk of money. If the house was yours before the marriage, you can prove that you worked and made all the payments while you were married, or there are other extenuating circumstances, buying out your spouse’s interest in the house may not be necessary as part of your divorce or the refinancing of the home.
5. What do the interest rates look like?
Pay close attention to the interest rates when you’re planning to refinance a home during or after a divorce. You need to make sure you’re taking good care of your finances, and that can be hard to do if the interest rates for a refinance are very high. If you’re not in a good position to refinance or the market is a serious concern for you at that time, you may want to work with your spouse to see if there’s a good compromise you can reach until interest rates come down again.
6. How is your credit holding up?
Your credit is going to be a significant factor in whether you can refinance when you’re getting a divorce. Don’t let your spouse ruin your credit. If you have joint accounts and credit cards it may be better for you to separate things as quickly and thoroughly as possible. That way your credit will no longer be tied to your spouse’s credit, so if there are problems they won’t stop you from getting a lender’s approval to proceed with your refinance.
7. Have you looked into getting cash out when you refinance?
Even if you don’t need a big sum of cash to buy out your spouse’s interest in the house, you may still want some cash to make improvements, take a vacation, go back to school, or anything else that’s important to you. If you have equity in your home, you can get that extra cash out of your refinance and get started on the next phase of your life. Especially after a divorce, moving forward in some capacity can be a very important and healing experience.
