Sometimes, getting approved for a refinance mortgage after a divorce can be challenging if you don’t connect with the right lenders or banks. No one gets married expecting divorce, but it happens often in today’s America. Not only is a divorce usually emotionally difficult.

There also are many financial concerns that are difficult to deal with and sort out, such as what to do about the family home and mortgage. Should one party keep the house, or should it be sold? What should be done about the mortgage? If the divorce is being finalized, should you refinance after divorce?

These many questions about the family home and mortgage are important to decide, and the answer depends on your personal and financial situation. Learn about mortgage refinancing after divorce or separation in this article. If wonder about how to get a mortgage after a divorce and want to apply, RefiGuide mortgage professionals can offer you reliable and accurate advice about your mortgage options.

What About Your Current Mortgage After Divorce or Separation?

refinance after divorce

If you and your spouse were on the mortgage documents, then you both are liable for the debt. It doesn’t matter if you are separated or divorced, living together or separately.

This is why many couples end up selling the family home after divorce and paying off the home loan.

If one party wants to keep the house – perhaps one spouse wants to keep the home and continue to raise the children there – the mortgage is still in place. But there are other options to review, too.

Below are more critical details about your mortgage options:

Sell The Home

Many people decide after a divorce that they would rather sell the home and split the profits. Depending on your case, you may agree with your ex to sell the property before or after the divorce is final.

If you decide to do this, you will need to think about the expenses and real estate market. You will probably need to pay for an appraisal, the realtor’s commission, any costs of repairing or staging the home, real estate and capital gains taxes. Many expenses usually come out of the closing proceeds.

Also, there is the chance that the real estate market is slow and selling the home could take longer than you like. You also may not get as high a price as you want. Still, selling the home is often what people decide to do in case of divorce or separation.

Refinance

Another option is for one spouse to stay in the home and do a mortgage refinance in their name only. This releases the other party from any responsibility for the mortgage. You also need to have the other person’s name taken from the title; they can still benefit when you sell the house if the home is still in their name. If one spouse’s name is on the mortgage but both names are on the title, talk to your real estate agent about a quitclaim deed or other options to remove the other person’s name.

Note that if you want to refinance the mortgage, you have to worry about how to qualify for a mortgage after divorce. You will need to qualify only on your credit and income. Some spouses may have difficulty with this; perhaps you took care of the children primarily and have a smaller income than the other spouse. However, you can use spousal support to qualify for a mortgage, assuming you will receive the income for at least three years.

The qualifications for refinancing your mortgage depend on the type of loan, the lender, and more. Generally, you need at least a 620 credit score to get a conventional mortgage, but 640 is better. An FHA mortgage can be obtained with a minimum 580 credit score. Usually, the maximum debt to income ratio is 43%.

If you do not have enough income to qualify for the mortgage on your own, you may need to sell the home.

Buy Out Your Ex

Another option is to buy out your ex. For instance, if the house is worth $300,000 and you both owe $200,000 on the home loan, there is $100,000 in equity. You would need to give $50,000, one way or another, to buy out your ex. To get the cash, there are several options. You could refinance into a $250,000 home loan and use $50,000 to pay your ex. But you need to qualify for the mortgage refinance without equity.

Another option: Take out a home equity line or credit (HELOC) or a home equity loan to buy out your ex-spouse. A HELOC is a revolving line of credit with a variable interest rate, while a home equity loan is a fixed-rate loan. Either a HELOC or home equity loan can work to get the cash you need at a reasonable rate, if you qualify. Each has advantages and disadvantages that RefiGuide mortgage professionals can review with you. Suffice it to say that a HELOC might be more appropriate for someone who is ok with a fluctuating interest rate, while a home equity loan has a fixed, but sometimes higher, rate. Thus, a home equity loan could be better for a more financially conservative person.

Mortgage Transfer

Sometimes you can transfer the current mortgage to the spouse who is keeping the home. The lender will usually want copies of your divorce decree and the quitclaim deed to transfer the home loan. This is also known as a mortgage assumption. The lender doesn’t have to grant the mortgage assumption, and you need to look at the terms if they are offered. Sometimes, the spouse giving away their interest in the home could still be liable if the other doesn’t pay the mortgage. This could hurt their credit even if they don’t have any interest in the home.

Summary on Home Refinancing After Divorce

It is never easy to get a divorce and deal with the many emotional and financial concerns involved. But many have done so successfully before you, and you can do it, too.

Whether to refinance after divorce, sell the home, buy out the other spouse, or do something else is a difficult decision. You should discuss this complex matter with your attorney and financial advisor, as well as discuss the personal nature of the decision with your loved ones. If you need assistance with refinancing your mortgage, Refiguide.org can assist you today.

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