Divorce. It’s not a pleasant topic, but it’s a reality for thousands of Americans each year. Beyond the emotional aspect of it, the logistics can be daunting. Typically during a divorce, one party will want to keep the marital property. This certainly is possible, but the person staying in the home will need to get their ex-spouse off of the mortgage loan, which can only be done through refinancing.
Refinancing is something we do at Accunet all the time, but when it’s refinancing by divorce there is a timetable you’ll need to be aware of. We like to break down it down into three different periods of time, because each period affects refinancing differently.
Period 1: Before the Divorce
We like to call this the pre-emptive strike. Starting the refinance process before the divorce is filed, if possible, is by far the quickest and least problematic period. When you talk to your mortgage lender about refinancing, they will ask you about your marital status. Your choices will be married, separated or unmarried. If you refinance before you file, you report that you’re still married, and then you can simply remove one of the spouses from the mortgage loan. You will have to perform a quit claim to remove the departing spouse from the title once the divorce is official, but the refinancing will already be taken care of.
If you already filed for divorce, the process gets a little more complicated.
Period 2: Separated
If you go to refinance after filing for divorce, you will have to report to the mortgage lender that you and your spouse are separated. Unlike refinancing beforehand, when you are separated, you’re going to have to wait until you have a written agreement between you and your soon-to-be ex-spouse that details how much one party will be paying the other – if any. This happens during the divorce proceedings, but it’s typically not quick. Until this written agreement is official, lenders will not be able to help you since they can’t know for sure what your monthly debts will be. Oftentimes you can get this agreement before the divorce is final, but you’re still looking at several months before you’ll be able to refinance.
Period 3: After Divorce
The last period of refinancing by divorce would be after the divorce is finalized. Sometimes one of the parties involved will have to pay alimony, separate maintenance or child support. To a mortgage lender, this becomes a monthly obligation, similar to a car payment. When trying to refinance, this will be included in your debt-to-income (DTI) ratio. It becomes more complicated when the receiving party of the alimony or child support wants to use that monthly income to stay in the home. This can also be done, but it’s not automatic. There is a required six-month period where the party actually receiving that alimony or child support from their ex-spouse before a mortgage lender can include that as income when calculating DTI.
There you have it. These are the three periods of refinancing during a divorce and how each one will affect your ability to refinance differently. The best case scenario would be that you’re able to refinance before filing, but that’s not always possible. Regardless of what period you may be in, it can be a complex process that needs expert attention. At Accunet Mortgage, we’re here for your refinancing needs to make this already stressful time in your life a little easier.