Refinancing Your House After Divorce: What You Need To Know

If you and your ex-spouse are dividing up shared real estate after a divorce, refinancing your house could be one way to move forward – and we’re here to make sure that process goes as seamlessly as possible for the both of you.

Let’s take a look at whether you should refinance after divorce and what you should know about your responsibilities for the mortgage debt.

3 Reasons To Refinance After Divorce

It may make sense to refinance your home after getting divorced. Let’s take a closer look at a few reasons why.

1. To Purchase A New Home

A refinance is one way to remove someone’s name from the mortgage. This protects an ex-spouse who no longer has ownership interest in the home. It can be an important step if that former spouse plans to purchase a house after the divorce and take on a new mortgage.

Removing an ex-spouse from a home loan will also lower their debt-to-income (DTI) ratio, which will make it easier to secure a loan with a fair interest rate.

2. To Protect Your Credit

If your name’s on the mortgage, then you have a legal obligation to pay it. If your ex kept the house but misses or is late on mortgage payments, your credit score could be affected. A refinance that removes your name from the mortgage will ensure you’re not held responsible for debt that isn’t yours anymore.

3. To Take Cash Out

Property values have climbed over the past several years, which means you might have enough home equity to get cash from your house.

A cash-out refinance can be one way to split assets with your ex. Say you want to keep the house but need to buy out your former spouse’s share of the home. With a cash-out refinance, you could get money from the equity to pay them.