Like each marriage, each divorce is unique. There are countless factors that might come into play when spouses are deciding whether it’s time to make a new start. While emotions certainly play a large role, couples cannot avoid the financial ramifications of a breakup. Economic shifts often happen quickly, and sometimes the changes cause husbands and wives to think carefully about how a divorce might affect their wallets and pocketbooks.
In today’s housing market, one surprising factor causing spouses to delay divorce is the historically low mortgage rates they locked in before rates began to climb. The prospect of leaving a home financed at a low rate and then facing the higher costs of purchasing a new residence can significantly alter a person’s willingness to move forward with divorce proceedings.
For more than a decade, many Americans were able to obtain mortgages with interest rates of 5 percent or lower, sometimes even lower than 3 percent. These low rates made monthly mortgage payments much more manageable. Starting around 2022, this changed, and someone purchasing a home today likely would have to pay approximately 7 percent.
This means that most people who bought a home with their spouse five or 10 years ago would pay hundreds of more dollars per month more in interest if they require a mortgage in the same amount on their post-divorce residence. Given other budget strains associated with the end of a marriage and the tough housing market in the New York area, some couples have sought temporary solutions, such as living together while separated and delaying their divorce filings.
However, there’s no guarantee that mortgage rates will drop significantly anytime soon. Trying to make do until things get better can be an enormous burden on spouses who want to move on and their children who are sharing quarters with unhappy parents. There several potential strategies that could ease the financial hit while giving everyone the chance start the next chapter of their lives
A knowledgeable attorney can advise on creative asset division solutions. One spouse might keep the marital home under the existing terms while the other receives other assets to offset the home’s value. They could also maintain co-ownership following their divorce. Depending on market conditions, refinancing may be another way to keep the home affordable for one ex-spouse.
Divorce decisions should not be dictated solely by financial concerns, but addressing these issues with professional guidance can help ensure a suitable outcome. As the Long Island divorce leader, Bryan L. Salamone & Associates, P.C. addresses the specific needs of clients throughout Nassau and Suffolk counties, including situations where mortgage rates or other financial matters complicate a divorce. For a consultation, please call 631-388-6009 or contact us online.