Choosing Refinancing in a Legal Separation

Divorce is a tough situation for everyone involved. However, it’s an everyday reality for many Americans today. The entire process of divorce can be messy, even in the most amicable separations. Divorce can be particularly challenging when significant assets and children are involved.


One of the biggest questions couples face during divorce is who gets the house? In some cases, one party will be required to allow the other to take possession of the house at no financial expense. However, it is more common that one party buys the other party out of their share of the property. When this happens, a mortgage refinance is required.


This article will discuss what happens when you need to refinance your home during a legal separation or divorce.


What Options Do I Have to Take Over My Property During Divorce?


When it comes to obtaining your home during a divorce, you have three options. These include:


  • Refinancing your home before starting the divorce process (easiest method)
  • Refinancing your home while you are separated (slightly complicated method)
  • Refinancing your home after your divorce is finalized (most complicated method)


1.   Refinancing Before Starting the Divorce Process


Refinancing your home before starting the divorce process is the easiest and most effective way to handle refinancing. Before applying for divorce, start the process of refinancing by talking to your mortgage lender. Since most mortgage lenders want to know your current financial and marital statuses, this is the best way to get the best rates. Using this strategy, you can use your current financial and marital status to get the best loan rates. This will allow you to afford the house independently once you and your spouse have legally separated.


2. Refinancing While Your Are Separated


If you decide to refinance while being separated, the process becomes slightly more complicated. First, you will have to contact your mortgage lender to let them know that you and your spouse have separated. At this point, it will be evident that your financial status is about to change. This can negatively impact your loan terms and financing rates. While a reliable lender will do everything in their power to help you get the best rates, switching from two incomes to a single income will significantly impact your options. Before going this route, it’s vital to talk to your divorce attorneys and your financial advisors to make sure you take the proper steps to secure your new future.


3. Refinancing After Finalizing Your Divorce


The last and most complicated option is to refinance after finalizing your divorce. In many divorces, one party has to pay alimony, child support, or monthly expenses to allow the other spouse to continue their current living status. While attempting to refinance after divorce is complicated, this can be a good option in some cases. Unfortunately, for most, your debt-to-income ratio and change in marital status can negatively impact your rates. In addition, if your divorce is dragged out, this can also put you in a sticky situation when you wait to refinance.


Contact All American Financial Services to Discuss Your Refinancing Options


If you’re going through a divorce, All American Financial Services is here to help you handle the most complicated financial aspects of your legal separation. Give us a call for help with all your Lancaster refinancing needs.


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