The refinancing of mortgages on the former marital residence can be a thorny issue in otherwise uncontested legal separation cases and divorces. Often, the parties can agree on who will receive the residence and who will pay for it, but the one who will be moving out is probably unwilling to keep the loan on his credit report indefinitely. Further complications arise when neither party would be able to obtain financing on his or her own, necessitating a sale of the residence. Fortunately, in cases where refinancing is a viable option, the process is relatively straightforward even after divorce.
Select a mortgage lender to refinance your property. Although you may feel a certain comfort level with your current mortgage holder, shopping around for better interest rates and lower closing costs could save you thousands of dollars over the life of your refinanced loan. Carefully examine a lender's transaction fees before obligating yourself; some mortgage brokers will make up for low interest rates by charging higher fees or points up-front. The lower interest rate may not justify these higher costs if you aren't going to remain in the residence for a long period of time.
Assemble documentation of your income so the mortgage lender can qualify you for a refinance loan. In general, lenders will want to see your last year's tax returns, complete with W-2 and 1099 forms. If part of the income you're using to qualify for the loan consists of alimony or child support paid by the other party, you may need to produce evidence of three months or more of regular, uninterrupted payments. Your lender will also require verification of your current employment as shown by recent paystubs or other documentation from your employer.
Check to make sure that everything that was supposed to be done in your divorce settlement relating to the former marital residence was in fact completed. For you to refinance a mortgage into your name solely, the other party must have relinquished all rights in the property not only in a separation agreement, but also in a deed. Additionally, if the other party has judgments docketed against him in the county where your home is located, a refinance of the property may not be possible without a release or payoff of the judgment. If the other party is refusing to sign a deed or has failed to satisfy judgments attached to his interest in the residence, contact the attorney who represented you in your divorce case; a non-compliant spouse can cause difficulties in a refinance transaction.
Provide documentation of your divorce settlement to the closing attorney on your refinance loan. Generally, this documentation consists of the separation agreement or, if your case was litigated and settled in court, the consent judgment. Depending on the contents of the agreement or judgment and the state in which your home is located, you may need to produce an estate waiver in which the other party renounces all rights to share in the proceeds of your estate in the event of your death. A separate estate waiver will not be necessary if your state doesn't require it or if the attorneys wrote one into the separation agreement or consent judgment.
Appear at closing and sign the documents presented to you by your closing agent or attorney. Ask questions regarding the contents or effects of any document you don't understand.
Items you will need
- Copy of your separation agreement or divorce decree
- Documentation of income
- Jupiterimages/BananaStock/Getty Images