Mortgage rates are soaring up to 8%! If you’re not planning to buy a new home, you might be saying “Who cares?” Or you might be gloating a little bit (like I am) thinking, “Wow, I’m so glad I got my mortgage when the rates were low. It’s proof that I’m just brilliant!”
But for people who are getting divorced, the rise in mortgage rates has some very real – and sometimes difficult – consequences. Why?
The conversation about what to do with the house (or apartment) can be one of the most challenging parts of the divorce process anyway. Our homes are often tied up in our sense of safety and stability – particularly if we have children. Those four walls carry so many memories – and so many hopes and dreams. We love our neighborhoods and our routines, the sights, the smells… even the noisy neighbors who used to drive us crazy don’t seem so bad when we think about having to move. Know what I mean?
There are generally a few choices about what to do with the house:
- Sell the house, everyone moves out and divide up the proceeds,
- One spouse buys the other out of their share and owns the house alone, or
- Work out some way of continuing to own the house together until both are ready to sell
In my little peephole into the world, I can tell you how it’s affecting my clients. One set of clients chose to sell their house, which is taking forever because there are simply fewer buyers now. So they continue to pay for the old place while they have moved on to their new homes.
I’m working with another couple where one spouse is buying the other out. While they’ve been working it out, the new rate has gone from 5.25% to nearly 7.4%. That has hurt them both – because the monthly payments will go up, there is less cash available for the buyout, and it will cost over $100,000 in interest payments over the life of the loan. Of course, that means there is less available for the kids as well as parents, for college, etc. Hopefully, they’ll be able to refinance again when rates go down.
For a third couple I’m working with, both spouses have been able to borrow money from family rather than deal with the banks.
So it is a time for improvisation and creative solutions! Let me know if you have any ideas.
Meanwhile, I can’t leave you on that note. So I just have to share a video with you that must be modeled on MY upstairs neighbors! I’ll miss them if I ever move out!