The home where couples live together is often a serious concern during divorce proceedings. People generally want to preserve their home equity or at least receive a portion of it when they divorce. Under equitable distribution rules, both spouses have an interest in marital property, regardless of who earned more during the marriage.
As people start evaluating their options for addressing their most valuable resources, they may have questions about their home equity and how to share it with a spouse. Refinancing is often part of the process of addressing the marital home.
Do spouses always have to refinance to address their home equity when they divorce?
Refinancing isn’t always necessary
Refinancing the shared mortgage is a straightforward way to eliminate responsibility for a mortgage and withdraw equity to share with a spouse, but it is not always necessary to fairly divide the marital estate. Some spouses agree to sell the home where they live together. In that scenario, refinancing is an unnecessary expense.
In scenarios where spouses have agreed to retain joint ownership due to a birdnesting custody arrangement or other personal needs, refinancing may not be necessary. Even in scenarios where one spouse stays in the home and the other leaves, refinancing is not always the best solution.
Especially in cases where the person staying has custody of the couple’s children and limited income, refinancing the mortgage may not be possible immediately after the divorce. Spouses need to consider their circumstances carefully as they establish goals for property division.
People preparing to address complex property division issues may need to look into pre-approval and explore creative solutions for home equity. Refinancing is often part of the divorce process, and those who cannot refinance on their own may need to come up with alternative solutions.