When a couple decides to separate, one of the biggest financial questions is what to do with the family home. In many divorces, one spouse wishes to remain in the property, which often leads to exploring refinancing options. Understanding how refinancing works during a divorce can help both parties make clearer, more confident decisions, especially in the DC, Maryland, and Virginia markets.
This guide explains common refinancing approaches and what to expect when evaluating the future of the home during a divorce.
Why Refinancing Is Often Needed
When one spouse keeps the home, refinancing is usually needed to:
- Remove the other spouse from the mortgage
- Adjust monthly payments based on one income
- Potentially access equity for buyout purposes
- Secure a loan structure that fits the new financial situation
Refinancing helps create a clear financial path forward for both parties.
Option 1, Traditional Refinance
With a traditional refinance, the spouse keeping the home applies for a new loan in their name only. The lender will review credit score, income, and debt levels to confirm the borrower can comfortably qualify for the loan on their own.
If approved, the new mortgage replaces the old one and releases the other spouse from financial responsibility.
Option 2, Cash Out Refinance
A cash out refinance may be useful when the spouse staying in the home needs to access equity to compensate the other spouse. This option replaces the existing mortgage with a larger one, releasing cash at closing.
This approach depends on available equity and the borrower’s ability to qualify for the increased loan amount.
Option 3, Rate and Term Refinance
This option focuses on adjusting interest rate, loan term, or payment structure without pulling cash out. It can help make payments more manageable for the spouse remaining in the home.
Rate and term refinances work well when the home will be kept long term and monthly affordability is the priority.
Option 4, Refinance with a Co Borrower
In some cases, the spouse keeping the home may bring in a co borrower such as a family member. This can help strengthen overall borrowing power and support mortgage approval during the transition.
This option should be carefully considered, since co borrowers become financially responsible for the loan.
Gather Documentation Early
Lenders typically request documents such as:
- Income statements
- Bank information
- Debt details
- Recent tax filings
- Property information
Preparing these items early helps streamline the refinance process and reduces delays.
Consider the Home’s Current Value
A current appraisal is often required for refinancing. Market trends in DC, Maryland, and Virginia can influence available equity and loan terms. A real estate advisor can help estimate value early so you know what to expect before starting the loan process.
Understand Long Term Affordability
Before finalizing a refinance, it is important to consider long term monthly costs including mortgage payments, taxes, insurance, utilities, and maintenance. Evaluating affordability helps prevent future financial strain.
How a Real Estate Advisor Helps
An experienced advisor offers support by:
- Estimating the home’s current value
- Providing market context for refinancing decisions
- Coordinating with lenders when needed
- Helping both parties understand the property’s equity position
- Offering neutral, professional guidance during a sensitive time
This insight allows you to make informed decisions about the home’s future.
Final Word
Refinancing the family home during a divorce is a significant step, but understanding your options helps make the process clearer and more manageable. With the right information and guidance, both parties can move forward confidently and in a way that supports long term stability.
About Matt Cheney
Matt Cheney is a top-producing real estate advisor with Compass in Washington, DC, guiding buyers and sellers across DC, Maryland, and Virginia through high-stakes moves, from luxury sales to estate settlements, downsizing, and divorce-related transactions. With over $771 million in career sales volume and 22 years of experience, including more than two decades working on complex and sensitive real estate situations, Matt is known for calm, strategic guidance and brings hundreds of successful sales to clients seeking clarity and support during life transitions.