If you are getting a divorce, you may need to refinance your mortgage. It all depends on what you want to do with the house after your marriage ends.
For example, many couples decide they are just going to sell the house. They have to split up marital property, and this is an easy way to do so because they can just divide the money from the sale. If you are in this situation, of course, you do not need to refinance. You simply sell and move on.
But in other scenarios, one person wants to keep the house and the other wants to sell. The solution is often for one partner to buy out the other person’s share. But why would this require refinancing?
Future payment obligations
The issue is that, when there are two people on the mortgage paperwork, they are technically both responsible for future payments. It does not matter if you and your spouse are married or not. From the lender’s perspective, you are both still obligated to make those payments.
If you keep the house on the same mortgage and you start missing payments a few years from now, for example, then the lender may try to collect those payments from your ex. Refinancing the mortgage gets rid of their responsibility so that this will not become an issue. You can both move forward without any financial connection.
The legal process
Dividing property is just one part of the legal process of getting divorced. If you are in this position, make sure you know exactly what legal options you have to split up what you own and protect the assets you deserve.