Divorce and Refinance ConsiderationsThe following divorce and refinance questions touch on the issues that are important when you're faced with either keeping the marital home or having your spouse buy you out.
Denise's Question: I am in the planning stages of getting a divorce. The house we live in was purchased 14 years ago. We have a large amount of debt that could be eliminated by refinancing the house and I would like to do that in my name and get him to sign a quit claim deed, allowing me to keep the house. Should I refinance the house before I file or after I file, and what other financial assets should I look at. Timothy's Answer: You have many issues to consider while you are in the planning stages of a divorce. Your finances should be one of your top priorities. While your proposed division of assets may seem fair, are you comfortable with the long-term financial impact of your decision? It is very common for women to have an emotional attachment to the family’s home, but I would urge you to consider whether you will be able to cover your mortgage obligation and the other expenses associated with maintaining a home on your own. Your question on whether you should refinance your home to pay off your debt is a good one. While it may seem an easy way to eliminate your debt, it may not be in your best interest. Before you initiate a refinancing and/or quit claim deed on your property, be sure you understand what you are getting into financially. Consider these questions: How much equity will be left in your home if you pay off your debt and refinance the loan? Will you have enough money to pay your new mortgage obligation and other related home expenses? Do you have the ability to qualify for a loan as an individual? How does my remaining equity in the home compare to the financial assets and pension income my husband retains after the divorce? I would highly recommend you hire a Certified Divorce Financial Analyst (CDFA) while you are planning your divorce. A CDFA will help you identify your marital assets, develop a post divorce budget and advise you on the financial impact of any proposed division of marital assets. They can show you how your decisions will impact your after-tax cash flow and net worth today, in 5 years and well into the future. They provide valuable insights you are not likely to get elsewhere. The division of marital property is almost always permanent. It is imperative you make smart and informed decisions today so your interests are protected in the future. »Return to top Can the mortgage company require me to refinance? Margarite's Question: We bought a house in 1993, and my husband refinanced it in his name in 2005, with the deed remaining in both of our names. After our divorce, he signed a quit claim deed giving me the house. The mortgage company wants me to refinance so that his name is removed from the mortgage. I pay the loan payments on time and I own the house, yet they want to charge me $17,000 to refinance the loan, instead of just letting me assume the payments. Is that legal? Brette's Answer: I'm curious as to how the mortgage company even found out. That seems odd to me - they are usually happy to just be paid. Their problem is if you default they technically can only go after him since his name is the one on the mortgage. That puts them in an iffy position on ever collecting. They don't don't like the situation because it is messy. You might try asking for a supervisor there and explaining to them that you just want to assume the mortgage. That should be an option. If you can leave things as they are, that would be easiest. If not, you ought to shop the refi around and get the best rate. Don't assume they're offering you the best deal. I'm not sure how a refi can possibly cost you $17,000 up front. The fees should be much lower than that. Go to a couple banks and get some rates. Good luck. »Return to top Can I take him back to court if he failed to refinance? Christi's Question: I got divorced over a year ago. The divorce decree stated that I was to assume all financial responsibility for the house until it sold, and when it did my ex husband was to refinance the truck and travel trailer in his name only. I sold the house last August as ordered, but my ex still has not refinanced the other things because his credit is messed up. This has ruined my credit because he did not pay the loans on time. Will I be able to take him back to court with a violation of the decree or how should I handle this? Brette's Answer: Yes, you can take him back to court on a violation. The problem is if a person has bad credit you can't force them to refinance if the bank won't allow it. He can be required to indemnify you however for your costs. Quantifying the effect of having your credit rating damaged is difficult however. »Return to top How can protect my portion of the equity if my husband refinances? Tasha's Question: My husband wants to "buy out" my interest in the family home and refinance the mortgage and home equity loan in his own name. How can I guarantee that I will get my portion of the equity, especially if I sign a quit claim deed. Timothy's Answer: If one partner wants to keep the marital home that is jointly owned, the other spouse may negotiate a "buy out option" where the equity in the home is traded for a commensurate amount of equity elsewhere. You should consult an attorney before you sign any legal documents. I cannot stress enough how important it is to have your separation agreement or divorce judgment include specific language about your refinancing plans and a contingency plan should the spouse who receives the home is unable to obtain a new mortgage. Too often, we see examples where the spouse who moves out and executes a quit claim deed runs into financial difficulties due to issues that are caused by issues with refinancing. The equity you receive in exchange for allowing your husband to keep the marital home should be well documented so there is no confusion regarding what assets you retain and what assets your husband retains after the divorce is final. »Return to top Related Articles:
Timothy McNamara is a certified divorce financial analyst, specializing in the financial issues that couples and individuals face when their marriage ends. Having gone through a divorce himself, he is passionate about helping people understand and manage the complicated financial issues divorcing couples often face.
Brette Sember is a former family and matrimonial attorney and mediator, nationally recognized expert, and author of many books on divorce and co-parenting. Ask her your legal questions or read her answers to previous posts.
This column is not intended to take the place of professional advice, but rather to provide financial information about the various issues that arise in a divorce. For specific recommendations concerning your situation, you should retain an experienced certified divorce financial analyst or legal advisor who can answer your questions based on the details of your case. WomansDivorce.com, Timothy McNamara, and Brette Sember disclaim any liability from any claim arising from any information contained in this column. This column is not a substitute for professional advice. Divorce Process / Children and Divorce/ Emotions and Divorce Home / Divorce Guide / State Resources
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