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Getting a Divorce? 3 Ways Refinancing a Home Could Help

Admin • Aug 14, 2020
Close Up Photo Of Refinancing Paper — Costa Mesa, CA — Secure One Capital
When a couple divorces, they have to untangle not only emotional connections but also financial ones so that both can go their separate ways. Their home and its mortgage is one of the largest assets and obligations that many couples have to deal with. One tool that can help you solve a variety of problems is refinancing.

What will refinancing do to help conquer financial and personal challenges in divorce? Discover three important ways. 

1. Refinance to Remove One Partner's Obligation
If one spouse will keep the family home (or a second home), the other partner may not want to continue being obligated for the mortgage loan. This is generally expected when the non-custodial spouse has no ownership interest in the home. But just because your divorce decree says that the house must go to one partner or the other, this does not rid either party of their debt obligation.

You generally have two choices to remove one person from a shared mortgage. You could ask the lender for a release of your ex-spouse from the mortgage. While this is possible, the lender is under no obligation to voluntarily waive anyone's debt obligation. The second — and more likely successful — method is to refinance the loan in one person's name only. 

2. Refinance to Pay Off a Spouse
Many times, one spouse will be granted the family home in exchange for buying out the other party's interest in it. Refinancing can also give you what you need to do this. When the party who will keep the house refinances in their name only, they can choose a cash out option. This allows them to take some or all of the equity with cash. This cash can then be used to pay off the amount due to the other spouse. 

Refinancing to pay off your spouse could be an easy way to get this task done quickly and relatively painlessly. You may also benefit from a lower interest rate. And both you and your ex can move on sooner than if you (or they) had to scrounge up the money in other, more difficult ways.

3. Refinance to Pay Off Shared Debt
Refinancing related to a divorce does not just help when only one person will keep the home. In an amicable divorce, it can be a tool to avoid conflict and delays during the divorce proceedings. How? 

Spouses who will continue to own a property together — even if only one will live in it — have a chance to consolidate multiple or pesky debts, such as those with high interest. Refinancing the shared home with a cash out option allows both to pay off marital debt equally and to have only one remaining joint obligation. 

What if you do want to sell the home after a divorce? In this case, refinancing could simplify the divorce itself while you avoid any sudden uprooting of the family.

The amicable couple, for instance, might refinance in both names and use the cash to clear the decks of other obligations. This turns a potentially complex divorce into a simple one, saving money. You also have no rush to force kids out of the family home before they are ready. Finally, the entire family has control over when and for how much the home is eventually sold.

Learn More About Refinancing
Could your divorce process go easier or faster with a home refinance? Whether you want to avoid complications, shift obligations, or pay off one spouse, it might be an easy way to fill a pressing need. Learn more about refinance options by speaking with Secure One Capital Corporation today.

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