How Mortgages and Refinancing Impact Illinois Divorce
Deciding who keeps the “marital home” is one of the most emotional hurdles in a divorce. While much of this desire is centered on memories and stability for children, the financial reality is often dictated by two things: mortgage interest and refinancing.
In Illinois, these aren’t just tax considerations. Understanding how housing decisions affect your post-divorce finances is essential to ensure your financial future remains sustainable
What Are The Effects of Refinancing?
To finalize a divorce, one spouse may refinance the home to remove the other party’s name from the mortgage or “buy out” their share of the equity. In certain situations, you may consider an assumption of the mortgage if approved by the lender. The fact you have a rare super low interest rate is something to discuss with your counsel. Refinancing to keep the residence is something to consider. While this provides a clean break on the title paperwork, it can come with a higher interest rate or a larger loan balance.
If you choose to take on a massive new mortgage payment to keep the house, the court isn’t obligated to lower your support payments just because your personal cash flow has changed, and they will preview actual earnings over discretionary debt.
Additionally, if a spouse’s interest in a residence is going to be paid by way of asset assignment, it is important to know the tax consequences, the risks associated with the asset being assigned in lieu of the equity, and the effect the use of that asset may have on support calculations.
The Illinois Court’s Consideration of Housing Costs
During the legal process, housing costs can be part of the Court’s determination:
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Temporary Support: Under 750 ILCS 5/501, the court can decide who is responsible for the mortgage while the divorce is still pending.
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Property Division: Under 750 ILCS 5/503(d), judges look at the “economic circumstances” of each spouse. They want to see if keeping the home is actually realistic.
If the cost of maintaining the home, plus support obligations, exceeds your realistic financial reach, the court may view the situation as unsustainable. The easiest way for a fair division to be obtained is to sell the asset and divide the proceeds as the court sees fit. However, there are other factors to consider, and you should have a realistic conversation with your attorney about those options.
The “SALT” Factor
Additionally, as we move through 2026, the State and Local Tax (SALT) deduction remains a factor for Illinois homeowners. The new higher deductions can affect affordability. However, these issues can also affect support obligations if the court determines net income not on standard deductions but rather on actual taxes paid. We will be discussing SALT deductions in an upcoming blog.
Making Informed Decisions with Help From Sterk Family Law
Keeping the family home can provide a sense of peace, but it shouldn’t come at the cost of your financial health. A higher mortgage payment can quickly strain your budget when maintenance or child support is also in play.
Before you sign those refinancing papers, it is important to understand how it relates to your divorce.
If you have questions about how your home or mortgage will impact your divorce? The team at Sterk Family Law Group, P.C. is here to help you navigate property division and support and connect you with mortgage professionals from our Resource Center. Contact us today for a free, no-obligation consultation.