If you and your spouse are both listed on the mortgage for your home, you are both liable for the mortgage payments until one of you is removed from the loan. This means that if one spouse stays in the home after a divorce without refinancing, and the spouse staying in the home fails to make payments, it will affect both spouses' credit scores. There are only two ways to remove someone from a mortgage loan. 1) Sell the home or 2) refinance the home if one of you is keeping the property.
Because Texas is a Community Property state, if the home will be refinanced, it normally will not happen until the divorced is finalized. If you or your spouse are staying in your home after the divorce, and you are both listed on the loan, your divorce agreement should include a specific date that the home will need to be refinanced by. This ensures that the spouse keeping the house is contractually obligated to refinance the home by the agreed upon date.
The spouse responsible for refinancing will go through the entire loan process from start to finish. This means that the person refinancing must qualify for the loan by themselves or have a cosigner on the loan. If you are considering keeping your home after a divorce, a licensed mortgage professional can help determine whether you will qualify or not.
Any arrangement can be reached by a divorcing couple, but in many cases, the spouse keeping the home will buy out the other spouse. A possible arrangement is to pay half of the equity in the home.
Half of Equity = (value home - amount owed on home loan) / 2.
Selling your home would normally cost you around 6% of the home's value so this could be factored into your agreement if desired. Again, any arrangement can be reached but this is typically considered fair if the home was purchased during the marriage.
It depends on the value of the home, but refinancing a home will typically cost 3% to 6% of the home’s value including closing costs. It is common to roll the cost of refinancing into the loan so that the person refinancing does not have to use funds from their bank account.
If you have equity in your home, it is possible to do a cash out refinance. A cash out refinance allows you to convert the equity in your home into cash. The cash out refinance loan value must be equal to or lower than the value of the home, and you must be able to qualify for the monthly mortgage payments. These funds could be used to help rebuild savings, or they could be used to help buyout your spouse.
The question of whether you will qualify for a refinanced loan or not can be complicated in some cases. A consultation with a licensed mortgage professional is usually free of charge, and can help you determine if a refinance is right for you.
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