Some spouses filing for the JOY of divorce become more involved in their finances. This is likely due to a spouse no longer handling these matters for the family. If a spouse wishes to remain in the home previously shared, it may make sense to refinance, and may become a requirement in the Final Decree of Divorce.
There are options
Mortgage interest rates are at historic lows, which is good news, whether buying a new home or refinancing the old one. Some may wish to rent in the short term as they restructure their lives after a split, but there are advantages to refinancing and staying put.
- Lower monthly payments: It may be fiscally smart to reduce this significant expense. The money saved can go towards the kids’ college fund, paying other bills or even using the extra money for vacations.
- Cash-out option: This involves paying off the original loan, getting cash that can be used as a down payment for a second home, or paying expenses or high-interest debts from credit cards. Even with a higher mortgage amount of a new loan, the loan’s interest rates are typically lower than any other type of loan.
- Reduce or increase the loan term: Reducing the term (length of the mortgage) means fewer payments and subsequently paying less interest. Increasing the term of the loan lowers monthly payments because the loan amount is spread over a longer period.
- Pay down the principal: Perhaps there was a lump sum in the settlement, so it may make sense to put that money towards paying down the mortgage’s principal, which can reduce the monthly payment.
Mortgage bankers can discuss options with those contemplating refinancing or purchasing a new home, a second home or an investment property. It is also worth noting that any fees incurred during this process are part of the loan. Moreover, mortgage bankers earn their commissions from the bank instead of the client. The process for any of the above is relatively easy, with little out-of-pocket expense.
It is also smart to plan ahead
Those filing for divorce may also want to structure the decree in a way to implement one of the above approaches to refinancing or purchasing a new home. The client can discuss this and other financial considerations with an experienced Board-certified Family Law specialist expert attorney when filing for divorce and dividing marital assets. These attorneys can then help a client negotiate a settlement that accommodates these important future financial plans.