The equitable division of property and assets is the rule of law in Oregon during a divorce. Unlike community property states, wherein all property and assets acquired during a marriage are divided equally, Oregon awards property and assets based on who earned or acquired property during a marriage. So, what happens if you and your soon-to-be ex-spouse bought a home together and you wish to keep it? Fortunately, there are options, including learning how to leverage home equity to keep your home. Read on for what to know about your mortgage during a divorce and how to leverage the home equity you’ve built.
Managing Your Mortgage During a Divorce: Three Options
If you and your spouse bought your home together and decide to divorce, you have three options for dealing with your home and mortgage.
Refinance and Convert to One Partner’s Name
If one partner wants to keep the home and qualifies to refinance using their own income and credit, that’s a viable option. Just be sure to check the Title- if both names are listed, you’ll need to remove your spouse using a quitclaim deed.
Sell the Home
You and your spouse may decide to sell the home you purchased, splitting the profits from the sale.
Buy Out Your Ex-Spouse
If you want to keep the home, you may be able to buy out your ex by paying them their share of the home’s equity. A knowledgeable mortgage broker can help you explore ways to leverage that equity, especially if you don’t have enough cash on hand.
How to Leverage Home Equity to Keep Your Home in a Divorce
If you want to keep your home after a divorce, understanding how to leverage your home’s equity is key. That’s because many people need to use some of that equity to qualify for a refinance in their own name.
Let’s walk through an example to see how this works. Here’s a hypothetical scenario:
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Home value: $700,000
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Remaining mortgage balance: $350,000
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Total equity: $700,000 – $350,000 = $350,000
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Since you and your spouse share the home equally, your individual equity is:
$350,000 ÷ 2 = $175,000
To keep the home and buy out your spouse’s share, you’d need to pay them their $175,000 in equity. That means you’d need a new loan (refinance) for:
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$700,000 – $175,000 = $525,000
This $525,000 refinance amount allows you to:
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Pay off the remaining mortgage balance
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Pay your spouse their share
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Keep the home in your name
Most mortgage lenders will allow a refinance of up to 80% of the home’s appraised value. In this scenario, $525,000 is about 75% of $700,000, which is within that range. If you have good credit, a sufficient income, and enough savings in your reserves, you would probably qualify for the refinance and be able to stay in your home.
Get Help Leveraging Your Equity to Keep Your Home in a Divorce
There are so many emotions at play during a divorce. If you need more information about how to leverage home equity to keep your home, contact Strategic Mortgage Solutions for a free consultation. We are here to help you secure a refinance loan to keep your home as you navigate a divorce. Call 541-275-1148 or send us a message for a no-obligation consultation.
