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Helton Law Firm, PLLC

Smart reasons to refinance a mortgage

For many Tennessee couples, the marital home is their largest shared asset. After a couple divorces, it may be a good idea to refinance the mortgage on that home. For starters, it could help to preserve an individual's credit if he or she is not going to live there. While one spouse may offer to buy the other out, both are still liable for making payments if both names are still on the loan.

Refinancing a loan might also provide an opportunity to cash out equity and do a buyout properly. Generally, each spouse is entitled to a portion of the equity built up during the course of a marriage. In lieu of that equity, it may be possible to ask for other assets in a divorce settlement or modify a spousal support arrangement. Refinancing a home loan can be ideal for those who have an adjustable rate mortgage and would like a fixed rate instead.

Having a fixed rate makes it easier to create a long-term budget in the event of rising future interest rates. At a minimum, it's wise to look into getting a new ARM that pushes a potential interest rate change into the future. Furthermore, getting a new mortgage could make it easier to use equity to pay bills or otherwise provide liquidity.

In a divorce, marital property is generally divided in an equitable manner. This means that each spouse will likely receive property that meets their current and future needs. Those who earn less than their partners, have a lower earning potential or have custody of children may be entitled to larger shares of such assets. An attorney could explain property division and how the law may impact a settlement.

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