Of course, high-interest rates do matter. The higher the rate, the higher your monthly payment. But if you are refinancing your current home mortgage into just your name so that you can keep your marital home, the most important things to determine are:
1) can you qualify for the mortgage amount you need to pay off the current mortgage balance (and perhaps any additional amount you may need to buy out your spouse’s share of the home’s equity) and
2) can you afford the monthly mortgage payments, real estate taxes, homeowner’s insurance, HOA fees, and any other costs associated with the property and still have enough money to put food on the table and pay your other bills?
If the answer to both of the above questions is yes, then by all means proceed with the refinancing even with the higher interest rate. Here’s why:
People typically refinance their homes for 3 reasons:
- To lower their interest rate and monthly payment
- To convert from a relatively short-term, adjustable-rate mortgage to a longer 15 or 30-year fixed-rate mortgage, and/or
- To take out cash
However, you are not refinancing your home for typical reasons. You are refinancing because of your divorce, and you want to keep your home. To do so, you will probably need to buy out your spouse’s share of the home’s equity (with this refinancing or with other assets) and you will probably also need to remove your spouse’s name from the current mortgage by refinancing that mortgage into just your name.
As you go through this process, remember your primary goal – To keep your home after divorce! If interest rates are high when you are trying to accomplish this and you can still qualify for the refinancing and can afford the monthly mortgage payments and your other obligations, then you can succeed in accomplishing your primary goal!
When interest rates come down in the future (and at some point, they probably will), you can then refinance to reduce your monthly payment, but in the meantime, you got to keep your home! And, of course, you always have the option to sell your home when the timing is right.
To make sure this process goes as smoothly as possible, we highly recommend you only work with a divorce mortgage broker, as early in the process as possible. Ideally, that divorce mortgage broker should be a CDLP™ (Certified Divorce Lending Professional).
A divorce mortgage broker will not only know which lender(s) will have the right mortgage product(s) for you, at the best interest rates given your specific circumstances, but they also understand the divorce process; are used to working closely with divorce attorneys, and are trained and experienced in dealing with the specific issues and requirements that mortgage lenders have for divorcing and divorced people.
In addition, a divorce mortgage broker can help with the following:
- Clean up your credit reports and find ways to increase your credit scores, if possible
- See what qualified income you have. If it’s not sufficient to qualify for the mortgage amount you need, they will strategize with your divorce attorney for ways to increase your income, such as creating qualified income streams from various assets
- Work with you and your divorce attorney to see if there are possible ways to pay off or assign the debt to your spouse to improve your current Debt to Income Ratio
- Collaborate with your divorce attorney to include the necessary language in your Divorce Settlement Agreement that mortgage lenders require for divorcing/divorced people and to remove and/or revise any language that might conflict with those requirements
There are over 300,000 mortgage loan officers and mortgage brokers in the U.S. Only a tiny percentage of them have training, experience, and expertise in working with divorcing and divorced people. Even fewer devote most of their practice to divorce.
I highly recommend and hope you chose an attorney for your divorce case whose specialty and practice area is devoted to divorce/family law and not an attorney who does a little of everything – criminal, immigration, corporate, and maybe some divorce/family law.
The same logic should apply when you’re looking to refinance or obtain a new mortgage and you are a divorcing or divorced person.
You need to work with a divorce mortgage broker whose specialty and practice are devoted to divorce, so you can rest assured that your mortgage transaction will go as smoothly as possible.
For Information on Jeff’s forthcoming book, Divorce House Sense: Can You Keep Your Marital Home or Will You Have To Sell?, go to https://nextactproperties.com/books/