How to Refinance Before a Divorce

If you refinance before a divorce, you must have the permission of your spouse, and you must disclose everything. If you cash out during the refinance, you must either split the proceeds or get a signed agreement from your spouse that you are entitled to all the proceeds or an unequal portion of the proceeds. If not, you could be accused of "hiding" assets (cash).

Instructions

1. Write a simple agreement that both you and your spouse sign stating that you both agree to refinance the home. If you are giving the house to your spouse in the divorce, it is better to refinance into your spouse's name only. If you are keeping the house, you want to refinance into your name only. If either of you cannot qualify, you need to refinance into both names -- shop around for the best rate possible. All terms should be written into the signed agreement in case one spouse "forgets" that you agreed to refinance.

2. Contact a mortgage broker or your bank and start the refinance proceedings. Alert the bank that you will be getting divorced. Even though you refinance in one person's name only, both must sign off on the mortgage, showing that the spouse who is not keeping the property and note in his name agrees that it should be transferred to his spouse.

3. Draft a partial settlement agreement once the loan has been approved. Include the terms you agreed to before you started the refinance project. If you settled other issues, you may also include them in the partial settlement agreement. Likewise, if you were able to settle all issues, draft a complete settlement agreement. Sign and notarized the agreement.

4. File the agreement with the court. If you have completely settled all matters, schedule a final uncontested hearing after the closing. If you file before the closing and get a divorce decree and the loan process is not complete, you will have to spend money to modify the final judgment in your divorce. It is easier to modify a settlement agreement than it is to change a divorce decree.

Tips & Warnings

• In the settlement agreement, be sure to include the date of marriage and the date of separation. Each allegation should have its own paragraph. For example: 1. The home is being refinanced by [bank name]. 2. The wife shall receive [$xxxxx] from the cashed-out equity. 3. The husband shall receive [$xxxxx] from the cashed-out equity. 3. [List of bills] shall be paid with the cashed-out equity [list bills and amounts due].