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Divorce Mortgage Guidance

Divorcing Your Mortgage

Divorces are anything but simple, and complicating the process are decisions about what to do with the marital home and its existing mortgage.

Preparing for divorce financially, especially if you have assets, typically requires an accounting of assets and debts, a decision on how to split them equitably and an execution of legal documents to divide financial and real estate assets.

So BEFORE you make decisions about your home or mortgage during a divorce, make sure you have the right people around you, including a good divorce attorney, a financial planner and a mortgage broker.

DIVORCE MORTGAGE GUIDANCE
What is it and who needs it?

Kim Renquist Photo

Divorce Mortgage Guidance is a free service provided by Spectra Mortgage that helps homeowners make informed decisions during a divorce. We can be the bridge between family lawyers, mediators, and financial professionals to help preserve home ownership eligibility and help protect credit scores for each divorcing spouse.

Kim Renquest is a trained and designated RCS-D (Real Estate Collaboration Specialist-Divorce) specialist who will be at your side throughout the divorce process.

To schedule an appointment for a free consultation and report, please contact Kim at krenquest@spectramortgage.com

Divorce Mortgage Guidance

How Divorce Mortgage Guidance Can Help

Divorce Mortgage Guidance really takes a consumer protection approach and is most valuable during the discovery phase. Kim can assist you with being a document wrangler and review mortgage underwriting and guidelines to help avoid any mistakes on the property settlement agreement.

Even if you don’t have a marital home with your spouse now, Divorce Mortgage Guidance is still important to you, as above all, saving your credit score before, during, and after the divorce is critical to ensure you can move forward with obtaining new credit and insurance once the dust has settled.

Divorce may feel like the end of the world, but there is life and financial peace after the storm passes. Let Spectra Mortgage help you navigate thru the eye of the storm and help keep your financial standing strong.

Divorce Can Be Messy – Make Sure Your Financial Standing Isn’t.

DIVORCE AND MORTGAGE
What are your options?

It’s important to remember that divorce isn’t a release from debt. Just because you are no longer married to someone, doesn’t absolve you from your mutual debts. The options available to you depend on a number of factors, such as how your property was financed and titled, whether one partner wants to stay in the home, the amount of equity you have in the home and your credit rating.

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What to consider when selling your home

In some cases the sale of the home may be necessary. It means that the profits of the sales have to be split per the divorce agreement. Couples need to consider the following costs they may incur:

- Realtor commissions
- Costs for sprucing up the home
- Capital gains taxes

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Refinance current mortgage

The Refinancing Option

Refinancing into a new mortgage may be a desirable solution, but it works only when one spouse can qualify for the loan on their own.

Mortgage eligibility depends on several factors, such as:

- Borrower's Income
- Borrower's Credit Score
- Amount of Home Equity

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Buy out of spouse's share

Keeping your home through a buy-out

To buy-out your spouse’s share means that you need enough cash or obtain a home equity loan provided you do have enough equity in the home. However, this could mean a financial stretch for the buying spouse.

Qualifying for a home equity loan depends on:

- Borrower's Income
- Borrower's Credit Score
- Amount of Home Equity

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Keep home and mortgage

Keeping your current mortgage

This can be a risky option because both spouses will continue to be responsible for the mortgage payments.

If one spouse fails to make mortgage payments, it can affect both parties' credit scores, jeopardize their future financial standing, or in the worst case, result in the loss of the home.

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How the Divorce Mortgage Guidance process helped a divorcing spouse keep her house.

Attorney and client looking at contract

Matthew and Hannah were going through the financial negotiations in preparation for their divorce proceedings and both had a desire for Hannah to stay in the house with their two children. They had other assets that could be split so Hannah would not have to buy-out Matthew from his portion of the equity of the house.

Matthew’s attorney implied that Hannah would just be able to assume the current loan, allowing her to keep the current monthly payment, which also decreased the amount of monthly spousal support needed to be paid by Matthew.

Hannah, uncertain of the financial requirements of the home, reached out for Divorce Mortgage Guidance. It was quickly discovered that the current mortgage in fact was not assumable, and a full refinance would be required to remove Matthew from the loan and the deed of the home. Hannah also would need to rely on an increased amount of spousal support in order to qualify for the new loan, as her job income itself was not enough to meet the required ratios of qualifying for a new loan.

Hannah’s attorney was able to restructure the payment plan and the divorce terms to allow Hannah to stay in the house before the negotiation phase was completed.

Divorce Mortgage FAQ

The deadline for refinancing would be set within the terms of the divorce settlement. You need to make sure that this deadline is reasonable and that the home can be refinanced by that deadline. Otherwise, you may risk having to sell it.

This is a risky solution. You may be eligible for alimony or child support per the divorce agreement, however, if your ex-spouse fails to make these payments at any point, you will still be responsible for the mortgage payments whether you can afford them or not. You may risk a negative impact on your credit score, or worse, loss of the home in the end.

In most scenarios this can only be achieved through a refinance loan which puts the new owner as the sole party on the mortgage.

Quit claim deeds are relatively common and are used to remove a person’s name from a deed by transferring ownership. They offer a lack of buyer protection and are typically used when both parties know each other. 

If affects the ownership and name on the deed only, not the mortgage. 

Divorce can be very challenging and sometimes, one spouse becomes determined to inflict as much damage as possible on the other. Unfortunately, they often do this by withholding financial assets or just outright refusing to negotiate over finances. If you find yourself in this situation, you should seek out the advice of an attorney immediately. You may need to cease communications with your spouse and let the lawyers handle things for a while.

Assuming the home loan, where one spouse takes full responsibility for the mortgage, is a popular option. Like refinancing, spouse A will remain as the sole borrower and spouse B will be freed from future liabilities. This approach can be more advantageous than refinancing if the assumable interest is lower than current market rates. Unfortunately, not all home loans are assumable. In fact, most mortgages made after 2008 do not have an assumable feature. Avoid wasting time by calling your lender and ask for a copy of your original promissory note to know whether your home loan is assumable or not.

It depends. There are several guidelines structured around the usage of spousal and child support payments. The most common requirements are that full payments have been received for at least 6 months and will continue for at least 3 years from the loan application date.

No, not at all. As long as you are on the mortgage, you technically are financially responsible for the repayment. Even if your ex-spouse is financially stable, knowledgeable and you trust that they will make the monthly payments, you are exposing yourself to financial havoc. Just one missed or late payment will cause significant damage to your credit score, which may cause you to become ineligible for qualifying for a credit. Additionally, the monthly payment of the marital home will be required to be included in your debt ratios when you try to apply for your own mortgage, possibly making your debt-to-income ratio exceed the allowable limit to qualify.

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