Law Offices of Barry I. Finkel, P.A.
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Keeping the house? What to consider about refinancing and divorce

You know you're headed toward a divorce. You know you want to stay in your Florida home, and your soon-to-be ex will be content if you do. But there's more you need to know.

It has to do with the best way of removing your spouse from the mortgage loan if you don't own your house outright. That involves buying your spouse out from the property, letting them cash out and you paying for the house on your own.

A judge granting you the house in your divorce does not mean your spouse will be removed from the mortgage. The court can't reverse the deal you had with your lender. Removing your spouse from the mortgage is your duty, and it typically means refinancing your loan.

There are things you must consider about your ability to refinance after a divorce. First, a divorce can negatively affect your credit score because when you remove your spouse's income or close joint accounts, that can increase your debt-to-income ratio or raise your credit utilization rate.

Also, if you are still tied to your former spouse on joint accounts and your spouse doesn't make payments - or racks up debt and doesn't pay -- that will harm your credit score.

And, finally, if most or all of your family's credit was in your spouse's name, you might have a limited credit file.

If you intend to refinance after your divorce, try to pay off all your credit accounts and close the joint ones. Entering the process with a clean slate will help you qualify on your own income because your debt-to-income ratio and your credit utilization rate both will be low.

One bit of advice, too. Begin exploring the refinancing process before the divorce settlement. Refinancing will require an appraisal, and by having that in hand, you'll know exactly what your property is worth, and there's less likelihood you'll bicker about your buyout price.

Divorce is emotional and complex, and there are a lot of things to consider. Real estate is one of them. If you have any questions, your divorce attorney is a good place to start.

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