Divorce is never easy, but the emotional issues are only part of the problem. Financial arrangements, including home purchases, bind two people together in a way that is harder to dissolve.
Many divorcing couples will find that the most valuable asset in the marriage is their primary home. Real estate is a great place to keep and build value, and the financial arrangement to buy a home may involve debt as well as capital.
It is generally a good idea to refinance a mortgage during or after a divorce for several reasons. It clarifies who will stay in the house and it allows one spouse to buy out the other’s equity in the house if it is not being sold.
Even if divorcing people are planning to sell the house, refinancing may be a good financial arrangement. Spouses can agree on the split of equity before another complicated property process has to begin.
Another reason to separate spouses’ financial lives is to protect each person from any problems that the other may be in. Credit histories and mortgage payment histories are attached to both spouses until there has been an official refinancing of the mortgage under one name.
Finances may be different after a mortgage, especially if alimony or child support is involved. If one spouse is not retaining the house, he or she may wish to use the equity to buy a new home, make an investment or enjoy the liquidity of cash while starting a new life.
Any divorce process may recommend legal representation. An attorney can look out for your needs and interests during a potentially difficult time with much to consider.
Source: Forbes, “Til The House Do Us Part: The Top Five Reasons To Refinance After Divorce,” Jason Crowley, accessed Feb. 16, 2018