Tips for Purchasing or Refinancing Your Home After a Major Life Change
Sometimes life throws curveballs, which may impact your home and other personal property. While it’s essential to determine your next steps, it’s worth noting that help is always right around the corner, so don’t let it cause stress! Whether you’re coming out of a divorce or another significant life-altering event, we’ll share some tips for handling homeownership in these circumstances.
Refinancing Your Current Home
If you plan to retain ownership of your home without a partner, there are several ways in which you can do so. First, you should consider if continuing to own the home is the right decision. It’s hard to consider leaving the place you call home, but sometimes, the cost, size, or location may not make sense once you’re on your own. This is a good time to discuss a refinance with your lender to see what costs are involved and if you can afford to refinance the mortgage with your finances.
If your financial situation allows you to refinance your existing home, your lender can initiate the process to help you remove your spouse from the existing mortgage. In any circumstance, you’ll want to be sure you can truly afford your spouse’s half of the home if you intend to own it solely. Here are a few scenarios to consider. It is important to seek legal counsel through the process:
1) You may be expected to buy out your spouse’s equity in the house if you own the home outright. So, if you have $200,000 total in equity and it’s divided in half between you and your spouse, you’ll need to find a way to pay the $100,000 to buy your spouse’s half.
2) If there is a mortgage on the home, you may be able to refinance, removing your spouse’s name from the deed, but note that you must qualify for the refinance with your income.
3) If you have little to no equity in the home, you may be able to negotiate with your spouse to allow you to stay in the home, keeping the mortgage as-is, but having an agreement in writing about who will pay the mortgage, insurance, and taxes. Any late or missed payments will impact both of your credit scores if you’re both on the mortgage, so that’s an important thing to keep in mind.
Selling Your Old Home And Purchasing a New One
Occasionally, with a big life change, you’ll want to start fresh. In this instance, maybe you’d like to sell your half of the home to your spouse and move on, or jointly decide to sell the home and split the proceeds. In either scenario, you’ll want to be sure you’re prepared for your next step. Here are a few considerations you’ll want to make:
- The first thing you should do is get your finances in order. Review your income, assets, investments, credit scores, and other financial interests to see where you stand. If your credit score needs some improvement, check in with your lender or a financial advisor, who can guide you through the steps for bettering your score.
- It might be best to consider renting a new home until you’re financially prepared to obtain a mortgage on your own. This can allow you to improve your credit score and save up additional funds before taking out a mortgage.
- If you are ready to buy, discuss your plans with your lender and determine how much home you can afford. You may need to downsize a bit if you are buying a house with one income (as opposed to two previously), and you’ll want to be sure you don’t overextend yourself financially.
- In any case, you’ll find that buying a new home is easier once your divorce is finalized as opposed to buying during the process.
No matter what stage of life you find yourself in, C&F Mortgage is here for you every step of the way. If you’re in the midst of a big life change, get in touch with our local industry experts today to discuss your homeownership options and the best financial moves for your situation!