When you and your spouse are deciding on property division following a
divorce, it is likely that your house is not only the largest asset you
have, but also the most expensive. Splitting the house is not as simple
as one person moving out and leaving the other spouse responsible. There
are often a few complicated financial and legal scenarios to maneuver
through before one spouse is in full control of the home.
What can I do to keep my family home?
One of the ways that the house can be placed in the name of one party only
is by refinancing the loan. When refinancing, the banks will look at the
individual's income and their net worth before agreeing to refinance.
Maybe the spouse who keeps the home will also be the one receiving child
support and alimony payments. This will be good information for lenders
to see since it will prove a higher income than they would show on their
own, but alimony and child support must be received for 12 months before
it is considered reliable income and these payments need to be shown as
ongoing. If a lender is uncomfortable with refinancing the mortgage, the
owner must sell the home.
There are a few ways to help refinance the home:
- Cash in assets to refinance with a larger down payment to reduce the loan amount
- Check title transfers for mistakes that could potentially delay refinancing
- Obtain a title insurance policy and check with the county clerk about the
change in property ownership
- Run a credit check before a signing a divorce agreement that details a refinance
- Hire an advisor that can help you make financial decisions during this
The homeowner paying child support and alimony may experience some challenges
when refinancing. Lenders will examine the new amount they will be paying
out monthly and any debts they have incurred before deciding to approve
a loan for a home. Further, if their credit history was made better by
their former spouse making regular bill payments on jointly owned assets,
a drop in credit score may prevent their ability to refinance.