Not all marriages have a storybook ending. If you are going through a divorce, you know how difficult it can be to navigate complicated matters like what to do about the home you share. Mortgage lenders in Georgia can explain your options and help you avoid common mistakes. According to Forbes Advisor, about 53% of U.S. couples divorced in 2022 owned their homes so, you are not alone. [1] Many people like you have had to decide whether to refinance for a better mortgage rate, sell, or jointly maintain the property and mortgage. Nothing is easy about dissolving a marriage, and the solutions regarding major assets are unique to each situation. We strive to ease the burden and aid decision-making by providing useful information about mortgage rates in Georgia, refinance possibilities, alternatives to selling your home, and options for financing a new one.
Transitioning in Place
The challenges of the current housing market have left many couples feeling stuck. With the cost of renting up 9% over two years, outrageous home prices, and mortgage rates in Georgia as high as 7%, many couples cannot afford to separate. This leads to cohabitation solutions within the home while going through the emotionally wrenching process of breaking up. From texting communication to sectioning the house and creating rules of use for common spaces, former married partners are learning to become housemates.
In addition to setting new physical boundaries, couples should address financial aspects, including what to do about the mortgage. We leverage our experience as a leading mortgage lender in Georgia to help homeowners assess their current mortgage status including the remaining balance, property title, who’s responsible, and other important terms. In most instances, couples own the home together, which means they hold joint legal responsibility for the mortgage debt. Another consideration is the home’s equity, which is the difference between the outstanding balance and the current market value, and which may be worth more or less than the balance.
Options for Refinancing a Mortgage in Georgia
Refinancing is a common mortgage solution for divorcing couples who share a home. This process essentially creates a new loan in only one person’s name. The catch: The party who intends to take on the mortgage must qualify with an approved income and credit score, which isn’t guaranteed. Credit score, income, and low equity can sabotage an attempt to refinance, and as a top Georgia mortgage lender, we see it regularly. For people in that situation, we recommend these financing solutions:
- Freddie Mac Enhanced Relief Refinance (FMERR): Homeowners with insufficient equity can refinance a lower interest rate and monthly payment through this mortgage-relief program.
- Federal Housing Administration (FHA) Streamline Refinance: Homeowners can refinance through this option even with negative equity.
- Veterans Affairs (VA) refinance loan: Veterans from all military branches can refinance, and it offers low (or no) equity down payment options.
Alternatives to Refinancing a Mortgage
The average Georgia mortgage rate in 2024 is around 6% for 30-year fixed, and 5.7% for fixed, 15-year terms. Because of the steep rates and fluctuating market, divorcing couples may seek other mortgage solutions. Here are a few:
- Mortgage Assumption—This action transfers an existing mortgage to another party. Because the loan rate stays the same, it can be less expensive than refinancing (depending on current mortgage rates). The buyer shoulders all loan terms including the interest rate, repayment period, and current principal balance. This releases the other party from the loan. The buyer must qualify and meet certain terms for assumption. Additionally, many conventional loan types, (including those backed by Fannie Mae and Freddie Mac), are not eligible. Divorce can be an exception in some cases.
- Buyout—Divorcing couples can split their home’s equity; one party can buy the other’s share of the mortgage. A home equity loan is one way a buyer can get the funds to pay the selling party, and it circumvents refinancing the original mortgage. Personal loans can also finance a buyout if the buyer doesn’t have the funds to do so.
- Lender Approval—At their discretion, a mortgage lender could drop an individual’s name from the loan without formally refinancing or transferring it. Since this increases risk, most lenders aren’t inclined to do this. However, with a proper decree outlining the property divisions of the divorce and a quitclaim deed, in which one party surrenders their ownership rights, divorce could sway their decision. Furthermore, most lenders will not agree to this unless they determine the retaining party has the financial capability to assume the payments on their own.
Choosing to Sell
Separating spouses can always sell their home, and it may seem like the most obvious, and straightforward answer. Many considerations impact the decision to sell so it isn’t necessarily easy. For example, couples with children face tough choices concerning school and activities. Selling the home can add more disruption to already stressful circumstances. There are also financial implications. These include the current mortgage rates, the home’s value, and selling costs. Selling may not be the best option for you and your family. The experienced mortgage lending team at Moreira helps clients like you work through these complex matters to find the best solution for your unique circumstances.
Choosing to Stay
The current housing market is challenging, and some couples may feel they have to wait for the mortgage rates in Georgia to drop before moving in any direction. Exes may need to get creative to give each other space. Sectioning the house while both parties reside there may not seem realistic, so spouses may alternate occupying the home until they can find a permanent solution. While this is still a potentially uncomfortable situation, for couples with children, it can provide a sense of stability during transition. Couples who agree to extend the timeline in their divorce agreement can save in the short term by delaying a move and allowing more time to consider the optimal plan for the mortgage and home. This maintains the status quo from the loan perspective, with each spouse contributing to and liable for payments. It requires considerable cooperation from both parties and clear, specific language in the divorce agreement.
Mindfully Moving On
As difficult as divorce can be, both parties must be mindful of their emotional and financial well-being and take steps to protect their credit. When it comes to the home and its accompanying mortgage, the divorce agreement should specify the following:
- The name of the person who will remain in the home
- The person responsible for the mortgage payments
- Stipulations for payments and qualifying events that will change the terms, like selling the house or refinancing the mortgage
- Additional provisions in case terms aren’t met, for example, the house does not sell within the agreed amount of time
Divorce is life-changing and full of hard choices. Knowing where to turn for mortgage advice can ease the stress of one big decision. The Moreira Team can help you understand your options about refinancing in Georgia, current mortgage rates, and selling the home versus keeping it. As a leading mortgage lender in Georgia, we work with prospective buyers and homeowners in all kinds of circumstances to develop personal financing strategies for successful home transitions. Contact us today for a quote.
Sources
[1]https://www.wsj.com/personal-finance/they-want-to-split-up-the-housing-market-wont-let-them-bafd67f0
