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When property division agreements require refinancing

One of the most emotionally charged aspects of a Maryland divorce is how to handle the disposition of the family home. Couples build a lifetime of memories in their home, and the house often represents far more than its value as a real estate investment. In many cases, one spouse desperately wants to hold onto the family home, and will negotiate the ability to do so as part of the property division settlement. That decision usually comes with the requirement that the property be refinanced solely in the name of the retaining spouse.

Accomplishing that requirement is often easier said than done. When a lender is faced with a refinancing request, the retaining spouse must be able to qualify for the new loan on his or her own, without factoring in the income, credit score or payment history of the other spouse. In the timeframe surrounding a divorce, many financial matters are often unsettled. This can make lenders nervous, and make it far more difficult for one spouse to refinance in his or her own name.

Securing new financing requires a current credit check. Credit scores often drop when a divorce takes place, as the couple makes adjustments to joint accounts, closing some lines of credit or removing the name of one borrower. Using credit to furnish a new apartment or replace household items lost during property division can have an impact on a borrower's credit score. Securing a new loan also requires that the borrower be able to show sufficient income to cover new and existing debt in addition to living expenses. Even if one spouse expects to receive alimony or child support, lenders often want to see a history of those payments dating back six months or more.

All of these factors can lead to difficulty in securing a new loan to refinance the family home. When making important property division decisions, Maryland spouses must consider both the short and long-term ramifications of those choices. That is never more true than in regard to handling the disposition of the family home.

Source: The Huffington Post, "It's Harder to Divorce the House Than the Spouse!," Ashley Tate Cooper, July 17, 2017

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