Divorce and Your Mortgage: Refinancing and Moving Forward

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Divorce can be a difficult and emotional time for everyone involved, and a joint mortgage loan can complicate the process even further. Fortunately, refinancing your mortgage provides a clear and straightforward solution. By obtaining a new loan in your name and removing your ex-spouse from the original mortgage, you can gain financial independence and start fresh.

Refinancing your mortgage after divorce

If you or your spouse want to keep the house after your divorce, refinancing your current mortgage is the cleanest solution. This process releases the spouse whose name is being removed from the loan obligation and transfers full responsibility for the mortgage payments to the remaining party.

After the refinance closes, the ex-spouse no longer named on the mortgage can be removed from the property’s title via a quitclaim deed, granting sole ownership to the remaining party. If your divorce has not yet been finalized, consider including the signing of the quitclaim deed as a condition in your divorce decree.

Aside from removing a former spouse or yourself from the mortgage, there are several other reasons to consider refinancing after a divorce.

other reasons to refinance after divorce

Refinancing your mortgage post-divorce may make sense for the following reasons:

  • Protecting your credit score: Protect your credit score by ensuring your name is removed from the mortgage. If both names are on the mortgage, both parties remain responsible for payments. Late or missed payments by your ex-spouse could harm your credit score. Refinancing to remove your name secures you from responsibility for mortgage payments and safeguards your credit score.
  • Purchasing a new home: Protect your future homebuying prospects post-divorce with a refinance. If you or your ex-spouse want to purchase a new home, it’s crucial to refinance to remove the name of the spouse who no longer has ownership of the old home. This will reduce their debt-to-income (DTI) ratio, allowing them to secure a lower interest rate and favorable mortgage terms.
  • Buying out your spouse: A divorce house buyout can be achieved with a refinance. The buying spouse can pay the other spouse either the current value of the home or take over their share of the mortgage. If you wish to keep the house and buy out your ex-spouse, a cash-out refinance can be used to pay them using the equity in your home.
  • Accessing home equity: Refinancing after divorce can also provide access to home equity for reasons other than buying out a spouse. For example, the spouse remaining in the home may refinance to consolidate debt or fund home improvement projects.
  • Changing your mortgage terms: The spouse staying in the home may want to refinance to change the loan’s term, interest rate, or even the loan type to make it more affordable or secure.

Navigating a divorce can be tricky, but we’re here to help you every step of the way. Refinancing your mortgage can provide a simple solution to your financial stress.

If you’re ready to refinance, Loan Pronto is here to help.

Get a free rate quote or fill out our online loan application to get pre-approved.

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