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Will I Have to Refinance My Mortgage After My Divorce?

Getting a divorce in Virginia comes with a litany of questions and issues that arise for each party throughout the process. Although this can be exhausting for everyone involved it is necessary to be prepared for everything that comes with separation and divorce.

One of the most stressful components of any divorce is the division of assets, especially when a home is involved. We frequently hear from clients who want to know how a house can be split and whether or not refinancing the mortgage will be necessary for whoever ends up with the property.

We want to prepare you for this part of the process as refinancing can have a major impact on your finances. Below are some tips and options to shield you from unnecessary surprises.

Loan Modification 

Although it’s rare that this will work, asking your lender for a modification is worth the effort.  If your mortgage terms are satisfactory under the existing loan then refinancing might not be your best option. To hopefully retain the favorable terms, it is helpful to ask your mortgage lender to modify the loan by simply removing your ex-spouse’s name from the mortgage instead of moving directly with a refinance.

Please be advised that although this is a beneficial option, many lenders will dismiss such a request for a few reasons. First, if the mortgage was signed with both of your names on it, this allows the lender to seek enforcement from both you and your spouse as you are both liable for the monthly payments. Additionally, the terms of your mortgage were secured due to the credit score and income, among other factors, from both spouses so removing one may result in the lender taking more risk.

Refinance Your Mortgage to Remove Your Ex

The more likely option in divorce is that a party will have to refinance the loan.  When you refinance, you’re essentially ripping up the old loan and starting brand new. This allows you to become the sole name on the loan, removing your ex in the process. If you and your ex aren’t able to come to terms on who will take the house, then the courts will decide for you.

The court will either reward the house to one side or force the home to be sold with the profits being split. For the former, whoever gets the house will have a set time, between ninety (90) days to six (6) months to refinance the mortgage. Usually, from the refinance, the party retaining the home will use the refinance process to not only remove their spouse from the loan, but also to obtain the money necessary to buyout their ex. If the court determines the house is to be sold, a refinance is not necessary as the new owner will become responsible for the payments. Any excess gained after selling the home will be split between both parties in proportions determined by the Court. 

Prepare for Higher Interest Rates

Refinancing a loan is not ideal under current interest and mortgage rates. The average 30-year fixed mortgage rate in the U.S. is expected to be roughly 7% in early 2023. That’s nearly double what the rate has been for the past decade.

If you bought your house with your ex in September 2019, your fixed mortgage rate is likely around 3.5%. The same is true for January 2013 – a decade ago. You will need to consider how the significantly higher monthly mortgage payments will affect your finances.

Work With a Virginia Family Law Firm

As you can see, navigating a divorce on your own can be costly. It’s important to prepare for all possibilities as you go through the legal process and to have the right representation on your side so you aren’t left picking up the pieces after your divorce is finalized.

The team at Rinehart Bryant can help you navigate the nuances of a Virginia divorce. Contact your Virginia family law firm today.

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If you are looking for a family law firm to help you through your Virginia divorce who actually cares about you, we promise that you won’t find a better home than Rinehart Bryant, PLLC.

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