Refinancing the Marital Home in a Texas Divorce

 Posted on March 31, 2023 in Divorce

One of the issues that a couple must address in their divorce is how the marital estate will be divided. The marital estate is made up of the couple’s assets, property, and debt. For many couples, one of the most expensive assets they have is the marital home, and coming up with an agreement on what should be done with the home can be difficult, especially if both spouses want the house.

Unless the couple agrees to sell the home and divide the profit, and regardless of which spouse ends up with the home, the issue of refinancing the mortgage will also need to be addressed.

Protecting Credit Scores

When one spouse is awarded the house in a divorce, the court order only addresses the property. It does not address the mortgage. In other words, even though the spouses sign a quit claim deed and only one of them will now legally own the home, both spouses' names will still remain on the mortgage. The only way to remove the now non-owner spouse is to refinance the mortgage in just the owner spouse’s name. Until this is done, the other spouse will be just as liable for the monthly mortgage payments.

This means if the spouse who owns the house gets behind in payments or if the home goes into foreclosure, these negative actions will have a derogatory impact on the other spouse’s credit score, even though they no longer own the property.

This is why it is imperative to include a stipulation in the divorce agreement that puts a time limit on how long the spouse who now owns the home to obtain a mortgage in their name only and also stipulate if they fail to meet that deadline or they get behind in the mortgage, the home will have to be sold.

Equity

Unless the couple has a high net worth, their other assets may not add up to the equity they have in the home. The spouse who will no longer own the home is entitled to their share of that equity. By refinancing the home, the spouse can include the equity they have in the home as part of the loan total and pay the other spouse their fair share, rather than splitting up savings and retirement accounts.  

The extra equity can also provide the spouse who is keeping the home with an extra financial cushion in the event of emergencies, rather than being forced to use credit cards with high-interest rates.

Contact a McKinney Divorce Attorney

If you have decided to divorce your spouse, make sure you have a skilled Collin County divorce lawyer advocating for you and ensuring you get your fair share of the marital estate. Call The Ramage Law Group at 972-562-9890 to schedule a confidential consultation and find out what legal options you may have.

Source:

https://www.rocketmortgage.com/learn/do-i-have-to-refinance-after-divorce