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Why you should refinance your mortgage after your divorce

During the property division process of a divorce, the family home is generally the largest asset that must be dealt with. Some couples decide to sell the home and split the profits. Others decide to let the parent who gets physical custody of the children keep the home and buy out the other parent. However, one thing that is often not considered is whether the home should be refinanced after the divorce.

There are several reasons why refinancing is a good idea, including:

1. Lowering your mortgage payment. If you haven't refinanced your home since interest rates plummeted, then now is a good time to do so. You can lower your monthly payment, which can be a huge help for many people who suddenly find themselves living on one income.

2. If you have an adjustable rate mortgage (ARM), now is a good time to consider a fixed rate mortgage. You will be able to get rid of the uncertainty that often comes with ARMs, and that will allow your budget to be set more firmly in stone.

3. Use your home's equity. If you are one of the many people who suddenly find themselves "home rich and cash poor," consider using the equity in your home to take care of some of the other bills you might have, such as high-interest rate credit cards.

4. Keep your credit protected. If your spouse will be keeping the home and buying you out of it, then it's suggested that you make sure this happens. If your ex wants to simply keep paying the mortgage or cannot buy you out, then some other arrangement should be made. If your ex defaults on the mortgage, it's not just his or her credit that will be destroyed. It's yours too.

Dealing with the family home during divorce doesn't have to be difficult. However, there does need to be some negotiation on whether to refinance the property or not. An experienced attorney can help you address such issues during your divorce.

Source: Forbes, "Til The House Do Us Part: The Top Five Reasons To Refinance After Divorce," Jason Crowley, CFA, CFP, CDFA, Nov. 27, 2017

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