Divorce is hard, and distributing assets can be even more challenging. With the current housing market, divorcing couples are going to extremes to keep the best mortgage rates. Many are separating but continuing to live together over this contentious topic. Rising mortgage rates are keeping people in uncomfortable positions. Mortgage rates and divorce can be a challenging field to navigate, speak to a New Jersey divorce lawyer. Call Jersey Coast Family Law for an initial consultation.

Property Division and Divorce

The primary issue plaguing divorcing couples is the current interest rates for homes are higher than before. In many cases, one person will have to refinance to keep their home. If they had a lower interest rate, it would likely be much higher during refinancing. This can hurt their financial plan and foundation. You keep the house but end up paying more. Many people who refinanced during the pandemic now have low rates of less than 3%, and refinancing would increase that to well over 8% in some areas.

This has led to the newest hurdle in divorce: determining who keeps the low mortgage rate and how. Previously, when a couple was divorcing, they would work out a mutually beneficial arrangement. One person would keep the home and refinance it in their name. In other cases, they would sell the house and split the profit. These are still options, but the outcome isn’t as favorable as it was previously.

Couples now choose unconventional methods to keep low mortgage rates in the awful housing market. Some divorcees stay in the home together to wait out the market. This is detrimental to their relationship but can result in a better property division option for them later. Another option is to co-own the property and wait out the market.

Couples seek even more creative options like sale-leasebacks, stopgap measures, and mortgage assumptions. Most couples are finding ways to buy time by finalizing their divorce and co-owning the home. They are waiting it out. Co-owning looks different for each couple. Some will stay in the house together and live separate lives. Others will have one person move out while staying on the mortgage paperwork. In either case, no one is refinancing the home. Another alternative is spouse trading spousal support for mortgage payments. You should speak to a New Jersey family lawyer to find the best option.

Co-Owning Versus Sale-Leasebacks

With co-owning a home, some couples wait for a specific milestone or buy themselves time for the market to lower interest rates. Often, they will continue to co-own until one of their children reaches a milestone like high school graduation. Often, this situation is related to children. The parents want to continue to provide stability and believe co-owning is the best way to do it.

Conversely, a sale-leaseback is becoming another popular option. This involves arrangements between the couple. One of them sells the home to the other one. Then, once the person takes legal control of the house, they rent it to the other spouse. They will then be given a repurchasing option later. Often, this works for couples who have been split up for some time and living apart. Their credit may have been hurt, and finances are in shambles, making it hard to find a rental. This eliminates the need to find a new residence or be in debt.

Finally, mortgage assumption is possible in a particular case. This is where one spouse will take on the mortgage without the other spouse. However, the decision falls with the mortgage company, which is not keen on handing out these arrangements. The spouse who takes over the mortgage must meet requirements, including affording it independently. The timing of the divorce and other factors can also determine if the person can assume the mortgage. While it is an ideal option for many, it is not always possible. Speak to a New Jersey divorce lawyer about mortgage rates and divorce.

The Importance of Financial Planning During Divorce

Property division is a significant factor in divorce. New Jersey is an equitable distribution state, which means all assets, liabilities, and properties are split in a way the court deems fair. What they believe is fair can be harmful to your financial picture. Marital property will be the primary focus of the asset division. This is any property that was obtained through the course of the marriage. If the possession or property was obtained prior to the marriage, it is separate property. Under equitable division, you may not get an asset split 50/50. The court will look at various factors, such as:

  • Length of marriage
  • Debts and liabilities for each spouse
  • Income
  • Age of the spouses
  • Physical and emotional health
  • Children
  • Assets

When the home was purchased will be a significant factor in property division. The house could be marital property if purchased during the marriage. This would make it eligible for equitable division. However, if one spouse owned the home before marriage, it is separate property. It is also a separate property if they did not add the other spouse’s name to the house. These cases would not qualify for the home to undergo equitable distribution. Discuss your asset division with a New Jersey family lawyer.

Mediation as an Alternative to Litigation in Mortgage-Related Disputes

Another option when separating from a marriage is meditation. This alternative dispute resolution is where the couple sits with a mediator and their attorneys. It is usually less expensive and contentious. It allows for more communication and is confidential. Often, you can resolve most aspects of the divorce. This is a good option for spouses who can collaborate amicably to reach a resolution. Jersey Coast Family Law has divorce mediation lawyers who can help during the mediation process.

Where Family Comes First

How We Can Help

Jersey Coast Family Law is a strong advocate for clients throughout New Jersey. We can assist with medication, property division, and divorce. We are well-versed in family law and aim to find a mutually beneficial agreement when possible. We have Red Bank and Toms River offices, serving clients throughout New Jersey. Call our New Jersey family lawyers at 732-361-4718.

Serving Clients in Ocean and Monmouth Counties
and throughout the State of New Jersey