In the US and the world, divorce rates have been increasing over the last few decades and sadly may continue. Many people are opting to never marry during their life because they don’t want to have to deal with a potential divorce if the relationship fails somehow. Marriages usually precede buying of a family home. But divorces do not necessarily end up in the selling of them. Many couples have children so that plays a big factor in their decision of what they will do with their home. There is an extremely high number of options for what they can do with their family residence.

The first one is of course selling their home to split the cash. This is by far the most simple and least complex. Each person in the divorce can decide what they want to do on their own with the money. If they are going to each buy a new home, then they should stay in contact with a loan officer so that they can help them get a new mortgage loan when the time comes. Sometimes for simplicity, one or both may choose to just rent in a new location. That is perfectly fine, but again, if they think that in the future they will decide on purchasing a home, they should keep in contact with a good and trustworthy loan officer.

Depending on market conditions for real estate, it may not be a financially smart decision to sell a home. Especially if the home values are still expected to increase over time. Which most of the time they do. It would be possible for the divorced couple to get the home ready for it to be rented out to act as cash flow for both of them. If they need a remodel, then a refinance for remodel would be a great idea in this situation. So they can pull out equity in the form of cash, use that money to make some home improvements that are needed for the home to be ready to be rented out. This would of course result in an increased mortgage payment if they haven’t already paid off their mortgage. But it would allow them to still own the home and use it to help each person be more financially stable as the years go on. The goal of renting would be of course that it covers the mortgage and then a little extra for profit and potential repairs. In summer 2022, where rates are already higher than they’ve been in years, this may not work well for everyone. Yes rates are high, but not compared to the 80s when it was in double digit percentages! The most important thing to do is to crunch the numbers with a loan officer to find out if a refinance for the purpose of renting later is a smart decision. Loan originators should only make decisions based on the client making a smart financial decision. So it is very important to speak with a trusted loan originator. This is also a small reason why we are against the big online mortgage loan companies. Their decisions and offerings are always based primarily on their own profits, so potentially putting you into a mortgage you couldn’t afford. Or charging exuberant amounts of origination fees while telling you that you are getting the best deal around.

What will happen to the split?

Another reason for a potential refinance is that there is a disagreement on what to do with the former primary residence of the couple. In this case many times it results in a cash out refinance, then one of the people in the couple gets a lump sum, while the other keeps the home. Usually the one who keeps the home is the person who gets full custody of the children. Since both people in the divorce do not want to make massive changes to their children’s lives. The person receiving the lump sum is free to do whatever they want with the money. However, of course we would recommend getting a smaller home nearby so that they can still visit the children or have them visit the new home.

Call or text anytime David Watermeier at 714-989-3252

or email at david@primestonemtg.com

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