“I can’t buy a new home if I’m still on the marital mortgage!” is a common concern expressed by the spouse leaving the marital home. Fortunately, this isn’t necessarily true.
The Common Misconception
In many divorce cases, the spouse retaining the marital home may not qualify to refinance the current mortgage. Consequently, the vacating spouse believes they can't qualify to purchase a new home while still being tied to the marital mortgage. While this thought process seems rational, there are specific steps and verbiage to include in the divorce settlement agreement to remove this obstacle.
Handling Court-Ordered Assignment of Debt
A Certified Divorce Lending Professional (CDLP®) is well-versed in handling Court-Ordered Assignment of Debt and knows the correct verbiage needed in the divorce settlement or separation agreement. When a borrower has an outstanding debt assigned to another party by court order (such as a divorce decree or separation agreement) and the creditor does not release the borrower from liability, the borrower has a contingent liability. However, if handled properly, the lender may not be required to count this contingent liability as part of the borrower’s recurring monthly debt obligations.
Why Working With a CDLP® is Beneficial
The key is to work with a knowledgeable and trained divorce lending professional. A CDLP® understands the unique requirements of dealing with contingent liabilities. There can be hidden issues, including title requirements and payments made by the now-liable spouse, which can result in denied mortgage financing if not addressed correctly.
The Value of a CDLP® in the Divorce Team
A CDLP® brings tremendous value to the divorce team during the settlement process. Their extensive background knowledge in family law, financial and tax planning, real property, and mortgage financing allows them to better support and assist both the divorce team and divorcing homeowners.
How a CDLP® Can Smooth the Transition
Do you have questions about how divorce may impact your ability to obtain mortgage financing? A Certified Divorce Lending Professional (CDLP®) can help make the transition smoother and more successful for all parties involved. Incorporating Divorce Mortgage Planning into the divorce settlement can help both spouses secure new mortgage financing post-divorce.
Get Organized With the Divorcing Your Mortgage Homeowner Workbook
Contact a CDLP® today for a copy of the Divorcing Your Mortgage Homeowner Workbook, a comprehensive guide to credit, real estate, and mortgage financing after divorce. This workbook will help you get organized, be prepared, and understand your mortgage financing position, whether you need to refinance the marital home in an Equity Buy-Out situation or prepare to sell and purchase a new home post-divorce.
Conclusion
Involving a Certified Divorce Lending Professional (CDLP®) early in the divorce settlement process can help divorcing homeowners set the stage for successful mortgage financing in the future. Divorce Mortgage Planning is a holistic approach that evaluates mortgage options in the context of overall financial objectives related to divorcing situations. Working directly with the divorce team, a CDLP® integrates the selected mortgage into the long and short-term financial and investment goals, minimizing taxes, interest expense, and maximizing cash flow.
This is for informational purposes only and not for the purpose of providing legal or tax advice. You should contact an attorney or tax professional to obtain legal and tax advice. Interest rates and fees are estimates provided for informational purposes only and are subject to market changes. This is not a commitment to lend. Rates change daily – call for current quotations. The information contained in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education purposes.
Copyright 2021—All Rights Divorce Lending Association
