When couples divorce, one spouse often wants to stay in their family home. That’s if they afford to do it on their own or with the financial help of their soon-to-be ex. If there are children, the spouse who’s moving out may agree that it’s best for the kids to only have to adjust to one new home rather than two as they move back and forth between co-parents.
Typically, it’s best when the spouse who keeps the home takes over full ownership and refinances the mortgage so that they’re the only one listed on it. However, spouses are often running into a potentially expensive dilemma these days.
Mortgages rates are considerably higher now than they were a few years ago when the economy – and the world – were in a very different position. Some people were able to get or refinance a mortgage at 3% or less. Since rates have risen considerably, financing now could mean doubling one’s interest rate. Even a few percentage point increase on a large mortgage can make an affordable home unaffordable – particularly on one income.
Some unconventional solutions
The other spouse may not be unaffected by the problem of having both names on the mortgage if the couple’s financial interests are going to be intertwined for a time – for example, if they have children. Couples are coming up with a wide variety of solutions – some more unconventional than others — to avoid having to refinance at a higher rate.
Some are opting to continue to live together for a time – especially if the other spouse can’t afford to buy a place at today’s prices. Others continue to own their home (and the mortgage) together while one spouse moves out. They may seek other assets in return in the property division settlement to make that worthwhile or maybe stay on the mortgage in lieu of spousal support. Both these options allow spouses to wait it out until rates and/or housing prices go down or the kids go to college. Other people are exploring options like mortgage assumptions and sale leasebacks.
Since a family home is typically the most valuable asset most divorcing couples have to find a way to deal with, it’s important to start thinking about that as soon as possible, if you’re divorcing. Having experienced legal guidance as well as real estate guidance can help you weigh all your options.