After a divorce, it’s usually a good idea to look into refinancing your home. Why? There are a few good reasons to do so, including that you will be able to protect your credit, could use your home equity for other purposes or buy your spouse out of the property.
One thing that people shouldn’t do following divorce is allow the home to remain in both their names. If possible, it’s a good idea to either sell the property or to refinance the home into one person’s name. Why is that a good idea? It comes down to protecting your credit. If you both have your names on the mortgage and one person forgets to make a payment, the other one is still on the hook, even if you aren’t supposed to be paying.
Tapping into equity is another good reason to refinance the home into one person’s name. If you use your equity, you might be able to consolidate your debts, establish an emergency fund or invest in the hopes of getting a return greater than the interest you pay on your mortgage.
Finally, remember that if you want to own the home on your own, you may need to buy out your spouse. If after negotiations, he or she agrees that you can keep the house, refinance it in your name alone. That way, if something happens to you or you miss payments, you aren’t affecting your ex and your ex won’t end up owning the home due to being on the mortgage.
Refinancing is all about protecting your best interests. After a divorce, you and your spouse should aim not to keep anything in joint accounts.
Source: Forbes, “Til The House Do Us Part: The Top Five Reasons To Refinance After Divorce,” Jason Crowley, CFA, CFP, CDFA, Nov. 27, 2017