When people first get married, they have every intention of creating a life together that makes them happy and that works. During that process, it is incredibly common for them to purchase a house together. If down the road they find that their life isn’t what they hoped it would be, they may decide to go their separate ways. When that happens, they have to decide what they are going to do with the home.
Figuring out what to do with a home during and after a divorce can be a challenge. There are a lot of emotional and financial implications that need to be considered, and one of the parties may not want to consider selling. If that happens, it could create mortgage conflicts. Finding the best solution is something that you are your spouse will have to agree upon, and it may require the intervention of professionals. In general, there are three options to choose from.
1. Refinance the Home and Buy Out Your Spouse
One of the options that divorcing couples can consider when it comes to their home is for one person to refinance the house and buy out their spouse. This often happens when there are children involved and one person wants to keep the family home. This ensures that they remain in the same school district and near friends and neighbors.
Since the house is the largest asset most couples have, refinancing could lead to mortgage conflicts and one person not getting an equal share of the profits. If this happens, you might need to consider getting a cash-out refinance. This will allow you to buy out your spouse’s equity in the home.
Getting a cash-out refinance means that you will be able to get a new mortgage at a higher amount than what you owe on your current home loan. The difference in amounts is paid to the other person in cash. How much you are allowed to borrow in a cash-out refinance will depend on what type of loan you choose.
2. Refinance Without Taking Cash Out
If you don’t have a lot of equity in your home, then you may be able to negotiate the division of assets without having to get a cash-out refinance. This may allow you and your spouse to keep the house but have the other person’s name taken off the mortgage. Knowing what refinancing options you have may require talking to a lender. They will let you know how much and which types of loans you may be able to qualify for so that you can keep the house.
In addition, you’ll also need to consider the insurance you have for your home. Since both you and your spouse bought the home together, both of your names are probably on the insurance policy. To get this changed and to see how it will impact your payments or coverage, you will need to call the Webb Insurance Group or whomever your insurance provider is.
3. Sell the Home
One of the simplest ways to pay off your mortgage and ensure that you and your spouse are getting equal shares of the profits is by selling your home. When you take this step, you will be able to split the proceeds equally and use them however you see fit. In general, most people use the money as a down payment to get into a new house.
If you decide to sell your home, you may or may not be responsible for making tax payments. This may also be true if you refinance your home. You’ll need to consult with a tax professional to find out how the sale impacts your obligations. In addition, if you decide to use a realtor to help sell your home, you will be responsible for paying their fees as well.
Again, selling your home will have an impact on your homeowner’s insurance. Switching the insurance from both of your names to one name may be easier when you sell your home, but you’ll still need to call your agent at the Webb Insurance Group or your current insurance provider. They’ll be able to let you know the best course of action to take to ensure your insurance is taken care of properly.
Determining the Best Course of Action
Divorce can be an incredibly emotional and trying time for both parties. When it comes to determining what should happen to your home, you’ll have to consider the financial and emotional implications. Before making any decisions, you might want to consider contacting professionals to help you make the right decision.
Not only should you be talking to a divorce attorney, but you might also want to consult with a financial planner and a mortgage broker. Make sure they have handled situations like this before, as that will ensure they are giving you and your spouse good advice. They’ll be able to let you know what options exist and which ones will allow you and your soon-to-be-ex-spouse to be financially stable in the future.
There are a lot of uncertainties when getting divorced, as well as emotions. It can be hard to know the best course of action to take when it comes to the family home and dealing with the mortgage. However, it is in everyone’s best interest to try to stay as logical as possible. No one wants to get stuck with something they can’t afford, and they don’t want the decision to destroy their credit.
In general, you have three options when it comes to dealing with your mortgage. Knowing which one is best for you and your spouse will depend on your wants and desires, as well as your financial needs. Talking to a professional can be beneficial, and it will ensure that everyone gets what they want.