Illinois residents who go through a divorce have different financial concerns once it has been finalized. Their budgets are often tighter as they have less money to spend on consumables. Refinancing a mortgage on what was once the family home can help free cash and may help raise your credit score.
Reasons to refinance after divorce
One of the biggest reasons to refinance your home loan after divorce is to remove your former spouse from the mortgage documents. Removing your ex from the document can help them as well. Ask your lender for a release of liability so your former spouse doesn’t have any future obligations on the home. When you refinance your mortgage, you can get terms that are more favorable to your current financial situation, possibly allowing more monthly spending money. Another option is doing a cash-out refinance. This option will let you access the equity in your home so you can remodel or pay off other debt.
Considerations for refinancing
When refinancing, you’ll need to consider several other factors. Most likely, your former spouse’s name is on the title. Use a quitclaim or warranty deed to remove their name. Note that refinancing following divorce may follow a slightly different process than when you bought your home, as you must produce additional documentation regarding debts and income.
Post-divorce life can still be complicated
Even after the final decree, you may need to make modifications to your divorce agreement. Refinancing your home may not be practical for various reasons, including high interest rates. You may need to seek alternatives, like selling the property or seeking a mortgage assumption, which releases your former spouse from financial liability.
Take your time reviewing alternatives to determine which will be suitable for your situation. Many people find that keeping a big family home is impractical. Children may have already left the house, or you may have considerable debt that you need to pay off. Splitting the proceeds from the sale with your former spouse is one alternative that can help you both if other scenarios don’t work.