Here are three areas to consider when making this choice.
Whose Names are on the Mortgage?
Release of liability—Ask your lender for a release of liability form. This document releases the borrower from the debt obligation. However, there’s no guarantee your lender will go this route. If not, consider refinancing.
Refinancing Your Mortgage—If a release of liability is out, opt to refinance. That means the remaining spouse must qualify on his/her own just with their income and assets. If you are receiving child support and/or alimony, make sure that money is considered to get the refinance approved.
Whose Names are on the Title?
Quitclaim deed—Your spouse signs a quitclaim deed to transfer their half of the ownership to you. A quitclaim protects the spouse who no longer has a legal interest in the home. Again, you’ll need to refinance to go this route.
Home Sell—If you don’t qualify to refinance without your ex and you can’t get a release of liability, then selling the home is the best option. You and your former partner can split the proceeds, allowing you to move forward.
Reasons to Refinance After a Divorce
Secondly, if your ex keeps the house but does not remove your name from the loan, you are still legally obligated. If your ex misses a payment or is late on a payment, that will affect your credit score! Getting your name off the loan ensures you are not held legally responsible for that debt.
Thirdly, with property values climbing over the years, you may have enough home equity to get cash from the property. A cash-out refinance splits the assets between the two of you.
If you want to keep the house but want to buy out your ex, a cash-out refinance can allow you to get money from the home’s equity. You can then pay your ex for his/her share of the property.
Bottom Line About Refinancing After Divorce
As long as both names are on the mortgage, both are legally responsible for the debt. Protect yourself and your ex by drawing up legal papers!
When you’re ready to settle your real estate property investment, turn to Lilly Title & Settlement in Staunton, VA. We’ll get your settlement done promptly and efficiently. Learn more about us here.