Mar 9, 2024 - News

How Denver divorcees are keeping their 3% mortgage

Illustration of a golden percentage symbol, but the 0's are broken wedding rings.

Illustration: Maura Losch/Axios

Mortgage rates are making dividing marital assets even more complicated for Denver divorcees.

Why it matters: It's not just the ex causing heartbreak β€” homeowners around the country are loath to part with their low mortgage rate.

The big picture: In Denver, where homes have appreciated wildly, navigating this situation is trickier, Divorce Lending Association president Jody Bruns tells Axios.

  • People who've owned their homes for a long time are dealing with large sums of equity to cough up, and they're buying in an inflated environment.

Zoom in: When one person decides to keep the house, some couples are keeping both names on the mortgage with an agreement to refinance in two or three years, Bruns says. Then, the person not living in the house will be taken off the loan.

  • But this arrangement doesn't work for everyone. If the vacating spouse wants their name off the loan quickly, the person keeping the home is often forced to refinance β€” or pull cash from other sources β€” to pay out the other's share of equity.
  • When mortgage rates make the monthly payments unaffordable for one person, and pulling equity is too pricey, couples opt to sell.

Reality check: The biggest concern for most people is cash flow, Bruns says. A higher mortgage rate squeezes your monthly budget, but it could also lower your tax bill.

  • For example, Bruns said a person making $84,000 who goes from a 3.25% to 5.125% mortgage rate on a new loan amount of $400,000 might only see a $2 difference in their bottom line after taxes.

Between the lines: For many recent divorcees, refinancing the house or buying a new one could send their monthly mortgage payment soaring, according to the Divorce Lending Association.

Zoom out: Some couples who split up are continuing to live together until mortgage rates fall, even if it means moving into the basement, MarketWatch reports.

What's next: Other couples are turning to mortgage assumptions, a rare but growing way to take over an existing home loan.

  • Platforms like Roam and AssumeList aim to expand as homebuyers look for ways to snag a loan with a lower mortgage rate.
  • Shoppers in areas where a high share of homeowners hold government-backed mortgages are more likely to see listings that offer a loan assumption, says analyst Hannah Jones, who notes most conventional mortgages aren't assumable.
  • Roughly 1% of DMV listings of homes for sale mentioned assumable loans, among the highest shares in the country, according to a new report.

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