How to Refinance the House During a Divorce
When divorce is imminent, you and your spouse must begin dividing your assets. If you share a mortgage, your house is likely the most significant joint asset. Unfortunately, a divorce--and a judge's decree stating which spouse is entitled to keep the property--is rarely enough to have a name removed from a mortgage loan. If you intend to keep your home and exonerate your soon-to-be ex-spouse from future mortgage payments, you must refinance the home into a new loan under your name only.
Other People Are Reading
Instructions
-
-
1
Verify that your income is sufficient to pay the mortgage payment on your own. It will be challenging, if not impossible, to find a lender willing to refinance your property if you are not able to afford the monthly payments.
-
2
Ensure that you and your spouse have built equity in the home. If you owe more on the house than it is worth, you may not qualify for mortgage refinancing.
-
-
3
Obtain your spouse's written permission to refinance. Because your spouse's name is on the original mortgage loan, his permission is required before you can refinance the home into your own name.
-
4
Get the permission of the judge in your divorce case. The court must always be notified before you take any large financial steps while a divorce is pending.
-
5
Shop around for a new mortgage lender. Your original lender may be willing to allow you to refinance the home into your own name during a divorce but may not give you the best interest rate on the loan. By shopping around at different banks and credit unions, you may be able to refinance and secure a lower monthly payment.
-
6
Fill out a new loan application and gather the financial documents your lender needs to process the application. Your lender will probably want to see your recent pay stubs, last year's tax documents and current bank statements. You also need to give your lender permission to pull and review your credit reports.
-
7
Wait for your lender to review documentation, process your application and approve the new loan. After you close on the new mortgage, your spouse's name will no longer appear on the loan and she will no longer have a legal claim to the property.
-
1
Tips & Warnings
If your mortgage loan is backed by either Fannie Mae or Freddie Mac and you owe more on your home than it is worth, you may refinance the property for up to 125 percent of the loan value.
Expect to pay closing costs of, on average, 1 percent to 3 percent of the total amount you borrow.
If your credit score is lower than that of your spouse, you may not qualify for a lower interest rate when you refinance the home into your own name. This could result in higher monthly payments on your mortgage.
References
Resources
- Photo Credit house for sale image by itsallgood from Fotolia.com
