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Advantages of refinancing a home as part of divorce

Dividing a house is one task couples in California might have to do if they are getting a divorce. Refinancing can protect the spouse that is not keeping the home. Often, if a person does not refinance, he or she will stay on the mortgage and be considered equally responsible for paying it.

A cash-out refinance might be one way for the spouse keeping the home to buy out the other person. Other options might be for one individual to keep assets of roughly equal worth. A person who would be owed spousal support might waive it in lieu of keeping the home.

However, there are other advantages to refinancing. A cash-out refinance can provide money for other purposes, such as creating an emergency fund, making other investments, home renovations or consolidating debt. If a person has an adjustable rate mortgage, it might be possible for him or her to refinance to get a fixed-rate mortgage, which would enable someone to pay a more predictable amount. Furthermore, with a refinance, a person might be able to lower his or her mortgage payment altogether.

California is a community property state. This means that, usually, the assets acquired by a couple after getting married are considered joint property. However, this does not necessarily mean that property division must come down to splitting everything 50/50. The couple might be able to reach a solution that suits them, where some assets are traded for others. There might be additional creative solutions involving the house. For example, some couples that have children might choose to keep the home and take turns living there while the kids live there full time. This may help the children adjust to the divorce. However, this is usually not a permanent solution, so after a year or two, one spouse might still consider refinancing.

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