Tips to Avoiding Housing Disaster During Divorce

By The Divorce Housing Pro – 03/23/23

Divorce can be a challenging process, both emotionally and financially. The most heartbreaking part of my job is when I have a divorcing or newly divorced client who contacts me with the single goal of staying in the home, often for the sake of school aged children, and I have to give them the crushing news that a deal cannot be done.  The harder part for me is that many of these could have worked with a little planning and foresight.   One of the biggest financial issues that couples may face during a divorce is how to divide their property and assets. For couples who own a home together, this can be particularly challenging, especially if they have a mortgage.

When a couple owns a home together and has a mortgage, one of the options is for one spouse to keep the home and buy out the other spouse’s share. In this situation, the spouse who is keeping the home will need to refinance the mortgage in their name alone. However, if interest rates are rising, refinancing can become more complicated, and divorcing couples may need to consider their options carefully.

Here are some considerations for divorcing couples on refinancing in a divorce when rates are rising:

Timing is crucial:

Timing is crucial when it comes to refinancing a mortgage during a divorce, especially when rates are rising. Couples should consider the current interest rates and whether they are likely to go up or down in the near future. For example, if a couple decides to refinance a mortgage during a divorce when interest rates are rising, they may want to act quickly before rates increase even more. If they wait too long, they may end up paying higher interest rates, which can significantly increase their monthly mortgage payments.

Consider the costs:

Refinancing a mortgage involves costs such as closing costs, appraisal fees, and other fees associated with the loan. These costs can add up quickly, and couples should consider whether they have the funds to cover these costs before deciding to refinance. Couples should also consider whether the savings from a lower interest rate will offset the costs of refinancing in the long run. For example, a couple may find that refinancing their mortgage during a divorce is too expensive due to the costs involved, such as appraisal fees, closing costs, and other fees associated with the loan. In such cases, they may decide to sell the property instead of refinancing it. On the other hand, if a couple has enough savings to cover the costs of refinancing and expects to save money in the long run with a lower interest rate, they may decide that refinancing is a good option.

Explore all options:

Couples should explore all options when it comes to refinancing a mortgage during a divorce. This may include looking at different lenders, loan products, and terms. Couples should also consider whether a fixed or adjustable-rate mortgage is the best option for them, given their financial situation. For example, a couple may discover that they can get a better interest rate or more favorable loan terms by shopping around and comparing different lenders and loan products. They may also find that an adjustable-rate mortgage is a better option for them if they plan to sell the property in the near future, while a fixed-rate mortgage may be more suitable if they plan to stay in the home for a longer period. Additionally, couples may want to explore different refinancing options, such as cash-out refinancing or streamline refinancing, to determine which one best suits their needs.

Work with a professional:

Working with a professional such as a loan specialist or financial advisor can be helpful when it comes to refinancing a mortgage during a divorce. A professional can help couples understand their options, evaluate the costs and benefits of refinancing, and guide them through the process. For example, a couple may benefit from working with a loan specialist or financial advisor who can help them understand their options, calculate the costs and benefits of refinancing, and guide them through the process. The professional can also provide expert advice on topics such as tax implications and credit scores, which can affect the refinancing process.

In conclusion, refinancing a mortgage during a divorce can be a complex process, especially when interest rates are rising. Divorcing couples should carefully consider their options and take a close look at the timing, costs, and available loan products. They should also seek professional advice from a loan specialist or financial advisor who can provide guidance on the refinancing process.

It’s important to keep in mind that refinancing a mortgage during a divorce can have long-term financial implications. By making an informed decision, couples can ensure that they are making the best possible choice for their financial situation, both in the short term and in the future. With careful consideration and the help of professionals, divorcing couples can successfully navigate the process of refinancing a mortgage during a divorce and move forward with confidence.

Disclaimer: This article was created with the assistance of multiple ChatGPT AI language models and has been edited and refined by Douglas Katz. The information provided in this article is intended for general informational purposes only and should not be considered as professional or expert advice. The views expressed in this article are solely those of the author and do not necessarily represent the views of ChatGPT or OpenAI. Readers are advised to do their own research and consult with relevant experts before making any decisions based on the information provided in this article.Pi