When one is faced with the prospect of a divorce, there are a lot of questions and uncertainty. One question that often comes up in divorce cases, is whether one spouse will be able to keep the marital home after the divorce. The answer is most often yes, if that spouse can afford it.
There are several things one must consider to determine whether they can afford to keep the home. One issue is that the spouse that keeps the house will have to essentially buy-out the other spouse's equity in the home, sometimes refinancing the home to pull out this money is the only way to do it. Another issue is that if there is a mortgage, then they will have to remove the other spouse's name from the underlying mortgage in some fashion. Finally, the big question is whether the spouse that keeps the house will be able to pay the new monthly mortgage payment and all of their other expenses on their own.
At North Oakland County Divorce Law we can provide answers to all of your family law related questions, please do not hesitate to contact us to schedule a consultation either online or by calling (248) 608-4123.
What Can I Do to Minimize the Financial Damage of Having to Refinance?
Given the above, in most cases in Michigan you will have to refinance if you want to keep the marital home after the divorce. The problem that many people are experiencing now is that their current monthly mortgage payment is lower, sometimes significantly, than the monthly payment they will have if they have to refinance immediately after the divorce because of the rise in interest rates. This has a twofold effect, one, they will be shouldering the burden alone (without any contribution from the former spouse) and two, the payment itself will be higher, even if you do not increase the actual amount of the loan itself. Finally, In many cases the balance of the loan itself will be higher if you want to keep the home because you will have to pay for the buy-out of the other spouse's equity as part of the refinance which further increases the post-divorce monthly payment.
Offset Other Assets Against Equity
There are some things that can be done. First, one can offset other property and assets against the other spouse's equity which reduces the amount of the loan required to refinance. For instance, sometimes the other spouse will agree to take more of the retirement assets, bank accounts, investment accounts or other property instead of cash for their share of the equity. This reduces the amount that will need to be refinanced for the buy-out of that equity, which will in turn reduce the monthly payment. This also can help with negotiating a longer period of time to complete the refinancing and buy-out because the other spouse has already received value for some or most of their share of the equity.
Negotiate More Time to Refinance
The time allowed to refinance is an issue because, historically, the time given for refinancing and making the payment to the other spouse is around ninety (90) days from the date of the divorce. Recently we at North Oakland Michigan Divorce Law have had some success at negotiating a twelve month grace period to refinance. It is our belief that the mortgage rates should go down next year due to a variety of economic factors including the election cycle in 2024. Then when you go to refinance, this should bring down the monthly payment and make it more affordable for you to keep your home in a divorce in Michigan. Also, keep in mind that the divorce process often takes six (6) months to a year, sometimes much longer, so even if you file for divorce now, we anticipate the rates will go down by the time you will have to refinance.
Divorce is emotionally and mentally draining as it affects every aspect of one's life. You do not have to face these questions alone or go into the divorce process blindly. Please do not hesitate to contact us through our online consultation request form or by calling (248) 608-4123 to schedule an appointment.