Deciding who will keep the marital home can get messy if both spouses want to stay in it.

“These decisions go more smoothly when you work with your spouse rather than being at each other’s throats,” says financial adviser Jeremy Runnels, CFP, of West Coast Financial in Santa Barbara, California. “It benefits everyone financially and emotionally.”

Once the couple decides who should get the home after the divorce, they need to make sure the recipient can afford to keep it. It’s smart to take the long view when making this decision.

Some couples decide to refinance a joint mortgage into one name upon divorce. What this does is release the spouse whose name is coming off the loan from responsibility for the mortgage.

However, unless that partner’s name is also removed from the title, they can still benefit from the sale of and equity in the home, so it’s important to not only refinance but also to update the title to reflect one owner. A quitclaim deed is commonly used to remove a spouse’s name from the title in a divorce.

A big factor for many divorcing couples is the reduction in income and assets that help borrowers obtain the best mortgage rates. The good thing is, mortgage rates currently are very low, which could work to a divorced person’s advantage, provided they qualify. The mortgage rate you get after a divorce will depend on the same factors that determine other borrowers’ rates, such as your income, debt, credit score and the market environment.

However, the spouse applying for the refinance can use only their own income and credit score to qualify.

If a partner will receive alimony or spousal support, they can use that income to qualify for a refinance, as long as the divorce settlement stipulates that they will receive alimony for at least three years.

If the couple has equity in the home, the spouse keeping the house could apply for a cash-out refinance to pay their ex-partner their share.

Contact us for a free consultation to understand your options thoroughly. 

A divorce agreement might require the sale of the home and the splitting of profits if the couple doesn’t meet a deadline to refinance the mortgage into one spouse’s name. If neither spouse can afford the mortgage on their own, they may have no choice but to sell. It may be in everyone’s best interest to get sell, pay off the mortgage, collect their share of the profits and start fresh.

In addition, if there’s a dispute over how much the home is worth, selling it is the best way to get the answer.

Besides the mortgage balance, couples should consider the costs they will incur if they sell or refinance the home. These might include Realtor commission, the costs of sprucing up the property to make it more attractive to buyers, real property transfer taxes, payoff fees, existing liens, and capital gains taxes.

Though selling the home is the only way to truly value it and calculate equity, that’s not always feasible or appropriate. The next best thing is to get a professional appraisal.

Sometimes, however, a couple might not agree on the appraised value. This can cripple efforts to move forward and can mean spending more time and money on attorneys and appraisers.

Depending on the situation, there may be other options available to you that may benefit both parties the best, financially.

Contact our Divorce Mortgage Specialists at (909) 821-7447 or using the form below so we can take a look at your situation and provide a free consultation.