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Why it’s getting harder for divorcing spouses to keep their homes

On Behalf of | Apr 17, 2024 | Family Law

Determining what to do with a family home is often one of the biggest decisions that divorcing couples have to make if spouses own it together (or have otherwise invested significantly in it), which is typically the case. If one spouse wants to keep the home and the other is agreeable to that, then they need to work that out financially as they divide their assets and debts.

If they still have a mortgage on the home, as most couples do unless they’ve been in their home for decades or were able to pay cash for it, it’s typically recommended that the spouse who’s keeping the home refinance the mortgage so they’re the only borrower. It’s typically best not to have joint debt – certainly nothing as large as a mortgage – after a divorce is final.

Rates have risen in recent years

There’s a new wrinkle that some people are running into as they look at their refinancing options. If they got or refinanced their mortgage a few years ago when the U.S. and worldwide economy were facing unprecedented challenges, they may have an interest rate of 3% or even lower.

Now, rates are considerably higher. Even a refinance at a few percentage points higher can make a massive difference in the amount due. It can wipe out all the progress made in paying down the mortgage and can make a mortgage refinance unaffordable.

Finding solutions – at least for the short term

Some couples are coming up with creative solutions – at least for the relatively near future. If their oldest child will be going to college soon, they may opt to continue to own the home (and low interest mortgage) together until then. Some may even cohabit together for a time. Others are exploring alternatives like mortgage assumptions and sale leasebacks.

Every situation is unique, so it’s wise to have real estate as well as legal guidance to help determine what options are available and the pros and cons of each option if you are divorcing. This can help you make the best decision for your family uniquely.

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