When it comes to warring spouses in a divorce, the spouse who is granted the house may think he or she has “won.” However, homeownership is a financial responsibility, one which now must be done on a single income. Sometimes a spouse in Virginia is happy to no longer be shackled to a home that holds bad memories. Whichever side of the coin one falls on, there are some important things to consider with regards to dividing the family home in the property division process, including the possibility of refinancing once the dust has settled.
First of all, it may be prudent to refinance the home. Even if a divorce decree says only one spouse is to be responsible for the mortgage, and even if the home has been retitled in one spouse’s name only, a lender is not bound by such a decree. Until the mortgage is refinanced in one spouse’s name only, both are responsible for mortgage payments. Refinancing can protect the credit of the non-owner spouse should his or her ex fail to pay the mortgage.
For those spouses who want to keep the house after a divorce, they will have to buy out their ex. Sometimes this is done through property division where one spouse keeps the house and the other spouse is awarded assets amounting to an equal value. Other times the spouse keeping the house may give up the right to seek alimony. Also, sometimes a cash-out refinance is an option. Here, a new mortgage is taken out on the home that is more valuable than the home’s current mortgage.
Refinancing can be done for other reasons as well. If there is equity in a home, refinancing gives a spouse access to that equity. This could be used to pay down debt, build a savings account, or maintain the home. It could even be invested and allowed to grow, which might even result in a higher return.
Divorce can be an emotional time, but any decisions made, especially big decisions such as what to do with the family home, should be made with the head, not the heart. An attorney can help their clients think objectively when it comes to property division so that appropriate decisions can be made.
Source: Forbes, “Til The House Do Us Part: The Top Five Reasons To Refinance After Divorce,” Dec. 2, 2017