Separation is never easy and to go along with the emotional toll it most certainly will take, there are matters of business you’ll have to contend with either before, during, or after the separation. One of those, unfortunately, will involve your home, who legally owns it, and how the remaining partner will pay the rest of the mortgage.
We’ve put together some guidelines for what you need to know about refinancing after a separation.
Be Proactive
Perhaps one of the worst things you can do regarding your mortgage or your shared property during a separation is wait until a divorce has been filed and the process starts in earnest. Waiting until lawyers or the court is involved will likely not only prolong the process of property separation and refinancing but could alter your plans altogether.
If you allow the home separation issue to wait until during or after the divorce, you risk getting into a sticky situation with your spouse. Mortgage and financial experts can help you make the best decision early on, but most importantly, inform your lender of your intent to separate early and they can also assist in the process.
Reasons to Refinance
Refinancing, in general, is a good practice as you may be able to get a lower interest rate than the one you currently have. Often times during a divorce, one party may need to buy out the other party’s equity which can significantly alter the way your mortgage is structured. If for some reason, you end up being on the wrong end of the mortgage, then a refinance could significantly lower your payments.
Bear in mind that no matter how your home comes out in the wash, the party responsible for the mortgage will still be required to make the payments. If you depended on your spouse for a significant amount of your household income, then this could change whether or not you or your spouse can afford the mortgage payments.
Too Late? What Happens if You Refinance After Divorce?
Sometimes, despite your best efforts, things just don’t go according to plan. Perhaps you or your spouse changed your stance on keeping the house or another snag came up during the separation that requires you to refinance after the divorce. While this is not an ideal scenario, it’s most certainly not beyond repair.
If refinancing after the divorce is the best course of action or the only one, then be prepared for a potentially lengthy process. You’ll need to first inform your lender of your divorce. From there, the party retaining the property will need written consent from the other to have their name removed from the deed. Typically, this is done as part of the divorce proceedings which can further exacerbate an already long process.
From there, the spouse who retains the home will need to provide income and all other documentation to create a newly refinanced loan in his or her name. So, if at all possible, settle the housing situation long before your divorce hits the court.
A Helping Hand for Refinancing
If you’re not sure where to turn, your attorney can likely give you counsel on how to proceed, but if you want to get a jump on the process and start long before the legal proceedings begin, then get in touch with Tidewater Mortgage Services and talk to a loan professional. Our loan experts have experience helping homeowners in all sorts of scenarios and can help you find the right solution for you.
