When a couple divorces, they must divide their marital estate, which may include the home they shared as a couple or family. Sometimes, divorcing couples choose to sell the marital home as each spouse downsizes their living space. However, due to current interest rates, many divorcing couples face significant complications in selling marital homes.
The Impact of Interest Rates on Mortgage Costs
Rising and high interest rates can significantly increase mortgage costs. A swing of one or two percentage points can change monthly mortgage payments by hundreds of dollars. In recent years, the residential mortgage market has seen interest rates in the six to seven percent range due to high inflation in the economy, after several years of mortgage interest rates at historic lows of around three percent.
Today’s higher mortgage interest rates can affect a divorcing couple’s decision to keep or sell the marital home. First, deciding that one spouse will keep the marital home may require that spouse to refinance the mortgage, potentially increasing interest costs. Furthermore, spouses who choose to sell their homes and buy new residences must deal with higher interest rates in the current market. Finally, selling a marital home can prove challenging in today’s interest rate environment.
Financial Considerations for Keeping the Marital Home
Changes in interest rates can create various financial considerations for a couple or spouse considering keeping the marital home after a divorce. When one spouse seeks to keep the marital home (to allow the couple’s children to remain in the family home, for example), they may have to refinance the mortgage to buy their ex out of their equitable share of the home and to remove them from the mortgage loan and property deed. However, refinancing may increase interest costs if the couple currently has a mortgage with a lower interest rate. Even obtaining other financing to buy out an ex’s interest in the marital home can create significant affordability concerns for the spouse who keeps the home.
Selling the House in a Changing Rate Environment
Selling a marital home in a high interest rate environment can have complications for divorcing couples. Higher interest rates put financial pressure on buyers by reducing their purchasing power or pricing them out of the housing market. Thus, couples who choose to sell the marital home may find a smaller buyer pool and may have to sell the house at a lower price than they would have preferred. Furthermore, both spouses now face the challenge of securing new housing in a market straining under high interest rates.
Alternative Solutions and Legal Implications
Divorcing couples have alternatives to a buy-out or sale of the marital home, such as continuing to co-own the home until more favorable market conditions develop. However, keeping the house and mortgage after divorce can create legal implications and challenges if one spouse stops contributing to mortgage payments.
Contact a Divorce Attorney Today
When you and your soon-to-be ex must divide your marital home in divorce, understanding how the current interest rate market affects a potential sale can help you choose whether to keep or sell the property. Contact Lisa Zeiderman, Esq. today for a confidential consultation with an experienced, compassionate divorce attorney to discuss your situation and legal options.