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Property division can sometimes require refinancing

Deciding what to do with the family home is one of the most difficult obstacles that many Pennsylvania couples face during their divorce. Very often, one party holds a strong desire to keep the family home, while the other is content to accept a greater share of other assets in return for the equity in the property. That arrangement may be agreeable to all parties, but it is important to understand that refinancing the home may be a necessity. Planning for that eventuality is an important part of the property division process.

In order for the departing spouse to thoroughly disconnect from the property, the home must be refinanced solely in the name of the retaining spouse. In many cases, that is easier said than done. In order to refinance the existing mortgage, the retaining spouse will need to qualify for the loan as though he or she were starting the process from the very beginning.

That means undergoing a current credit check. It is often the case that both spouses will experience a sudden decline in credit score during or immediately following a divorce. That is partly due to to financial changes that come about as a result of the split, such as paying off or closing certain lines of credit and removing one party's name from others. In addition, many people need to rely on credit to furnish their new living arrangement and cover basic expenses while the details of their divorce settlement are negotiated.

In addition, the retaining spouse will also need to provide income verification to assure the lender that he or she will be able to make the payments as outlined in the new paperwork. If alimony or child support is to be considered as part of one's income for qualification purposes, lenders often require six months or more of demonstrated payment history before they will issue a new loan. That can pose a problem for spouses who want to refinance in a shorter window of time. Understanding these and other considerations that impact home refinancing is an important step that Pennsylvania residents should take as they move through the property division process.

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

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