One of the most contested assets in a divorce is the family home. If the Illinois family law judge ruled in your favor and awarded you the home or if you purchased or gave up some other property for the house, then you will have to disentangle your former spouse’s name from the mortgage. This process is called refinancing.
Reasons why refinancing your home mortgage is important
The main reason it’s crucial for you to refinance your home after a divorce is that joint debt can create many problems, not just for you but for your former spouse as well. For one, the costs of poor credit from a single missed payment can be great. If you’re trying to buy a new home or car or even rent an apartment, your credit score will take a serious hit. Secondly, it can help protect you from future liability. If your former spouse stops making mortgage payments and the house goes into foreclosure, the lender may also hold you liable for the debt.
Another reason why this is important is that the court can hold you in contempt if your final divorce decree requires you to refinance and you don’t. This mistake can lead to heavy fines and even some time in jail. Moreover, the court will force you to refinance at a time you may not be well prepared to do so.
The process of refinancing your home loan after a divorce
If you’re awarded the family home in your divorce, you’ll need to refinance the mortgage in your name only. This will require you to go through the entire mortgage process again, including a new loan application, credit check and appraisal. You’ll also need to provide documentation of your income, employment history and assets.
Once approved for the loan, you’ll need to sign all the necessary paperwork and pay any associated fees. The lender will then send over the new loan documents for you to sign. If everything goes through, the new loan will be your only responsibility.
Refinancing your home loan may seem complicated, especially immediately after divorce when you are settling into a new life, but it’s necessary. A basic understanding of how this process works in Illinois can help you avoid costly mistakes.