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Divorce Damage Control
There are many questions you might be asking at this time, particularly surrounding
your home. We are here to help. Let’s first break down some of the basics.
“I think I want to stay in my home…what do I need to keep in mind?”
First, take into consideration the size of the home, utilities, payments, family needs. Does staying
in the home truly make sense? You will likely now be entirely responsible for the house payment,
taxes, insurance, upkeep, maintenance and other related bills. Your household income may be
decreasing, and your overall expenses may be increasing if you are subject to a court order for
support, so it is important that you are aware and thorough in determining what your actual
expenses will be in keeping and maintaining the home on your own.
“My spouse is entitled to share in the equity we have in our home…how is this handled?”
The equity in the home needs to be determined by an appraiser – call us if you need a
recommendation and referral. The appraised value less the eventual costs of selling
(commissions and seller closing costs) equals the equity to be split between the parties. This is
the amount you will be obligated to give to your ex-spouse. And in general, any money you or your
spouse contributed to the home from your own pre-marital assets must also be accounted for in
determining the final division of equity.
With the divorce, your spouse may put a marital lien on the property or there may be a court
ordered mandate for distribution of the equity, possibly including interest on that amount.
This means that you will likely have a specified amount of time to obtain the funds needed to give
the ex-spouse their portion of the equity. This can be done by cashing out the equity in the home
with a new mortgage, selling the home or by using other assets you have to “buy out” their stake in
If you choose to stay in the home, you have two financing options to pay your ex-spouse.
You can either refinance your home to get cash out, or you can obtain a new second mortgage or
home equity loan. This is where you will want the advice of a trusted mortgage professional.
Even though you may now be qualifying for the loan without a spouse’s income – with your own
good credit and income, you can usually qualify on your own.
Often, child support and alimony is viewed as stable income, if it has been received for three
months and is likely to continue for at least three years.
“What if I am the one leaving the home?”
It is important to know that even though the divorce decree awarded the home to your spouse, you
are still obligated for this debt in the eyes of the mortgage company.
Many people assume that by filing a Quit Claim Deed removing themselves from the title, they
are no longer responsible for the mortgage.
A Quit Claim Deed only eliminates your name from the title of the property, but not from the
mortgage loan. The benefit of a Quit Claim Deed is that if the spouse on the title passes away, the
property will go to his or her heirs rather than to the ex-spouse.
“How might this scenario impact my credit – and what can I do?”
Unfortunately for many, divorce is a time of great financial hardship and credit challenges.
Because you are obligated on the mortgage until it is paid in full or refinanced, it is imperative that
the person responsible for the payment remains current. One possibility you have to remove your
name from obligation is to contact the company which currently holds your mortgage, and ask to do
a “Qualifying Name Delete Assumption.” This process will leave the existing loan in place, but
would relieve the non-occupying spouse from their obligation on the loan. Give us a call, and we
can explain more about this process, or help you determine if a refinance may make more sense
“If I want to go buy another home – am I going to be out of luck while I am still listed on the old
Although it is difficult and not usually advised to purchase another home until your divorce is final,
we are happy to look over how you expect the financial situation to be finalized, and help you get
ideas as to what you will qualify for. Remember that in most situations, child support and alimony
must have been received for three months, and be likely to continue for at least three years in order
to use this income for qualifying. Even if you are still listed as a co-borrower on the mortgage for
the prior home, if the divorce decree states that you are not obligated for the mortgage, many
mortgage programs will allow you to be qualified without this obligation. However, any late
payment issues on the mortgage held by your ex-spouse will impact your credit scores, as the
mortgage is still a joint liability in the eyes of the credit bureaus until you are removed via a
refinance, sale or other method as described above.
“What if I do want to purchase another home before the divorce is final?”
This may be possible, but be aware that your spouse may have a marital interest in your new
property, and it will need to be handled by your attorney with a Quit Claim Deed being given from
your ex-spouse to you. You will also have to qualify with the full debt from the current home,
because there would not yet be a final divorce decree assigning ownership. Be very careful with
this situation, especially as the financial situation you expect…may not be the final result, once the
decree is entered.
Taking the time to talk with us during this process and before you decide to start looking at a
new home can help eliminate many of the concerns or questions that often surface in these
situations. We understand this may be a very difficult time, and you have many decisions to make.
We can provide you with a free financial consultation, credit check, and mortgage strategy review –
so that you have the answers and information you need to make good decisions.
We’ll help you sort out the options and strategies you have at hand, and do our part to help you
at this time…and down the road. We understand that it’s not just a house – it’s your home.
|What do you give up
or leave behind?
What about the house?