Have you heard the phrase, "I want to divorce this house!"? In reality, you can't simply divorce the house or the mortgage. While it might be wishful thinking for such an easy solution, there is too much involved with such a large marital asset.
Key Considerations in Divorce Mortgage Planning:
- Legalities of Ownership: Determining which party should receive any equity ownership.
- Tax Implications: Handling the tax ramifications from selling the marital home or mitigating potential capital gains taxes for one or both parties on a future sale.
- Post-Divorce Housing: Positioning either spouse to be in a strong position to purchase a new home post-divorce.
The Journey of a Divorcing Homeowner
Divorcing homeowners embark on a journey of self-reflection, negotiations, settlement, and the mortgage process, hopefully ending with a successful conclusion. The traditional journey begins with deciding "What to do with the marital home." Questions include whether one spouse should keep the house, should they sell the home, what about the kids, and the financial aspect of whether one can afford to keep the home on a single income.
Key Stages in the Journey:
- Decision Making: Determining whether one spouse will retain the home, sell it, or consider other options.
- Negotiations: If one spouse is retaining the home, determining its value, discussing equity buy-outs, spousal support, the refinance timeline, or when to list the property for sale.
- Settlement Agreement: Outlining the division of marital assets, assignment of debt, and ensuring the verbiage aligns with mortgage guidelines to facilitate post-divorce mortgage financing for both spouses.
Importance of Divorce Mortgage Planning
Mortgage planning shouldn't happen after the negotiation and settlement stages. Divorce Mortgage Planning should be initiated during the negotiation stage.
Examples of Planning Needs:
- Valuation of the Marital Home: Ensuring the appraisal used during negotiations matches the mortgage lender's requirements.
- Support Determination: Addressing fluctuating income for the paying spouse or lump sum payouts in place of monthly support.
While one can't simply 'divorce the house,' incorporating Divorce Mortgage Planning into the process can significantly impact the success of the divorce settlement.
Benefits of Working with a Certified Divorce Lending Professional (CDLP®)
Divorce Mortgage Planning involves creating an executable settlement agreement that aligns with mortgage guidelines, ensuring closure and peace of mind.
Role of a CDLP®:
- Integration with Divorce Team: Working directly with the divorce team to incorporate mortgage planning into the overall process.
- Understanding Intersections: Possessing a unique understanding of the intersection of family law, financial and tax planning, real property, and mortgage planning.
- Ensuring Compliance: Helping ensure negotiations and settlements comply with mortgage rules and regulations, facilitating successful execution of court orders.
Contact a Certified Divorce Lending Professional (CDLP®)
Working with a Certified Divorce Lending Professional (CDLP®) and incorporating Divorce Mortgage Planning into the divorce settlement may help both spouses obtain new mortgage financing post-divorce.
Get the Guide: 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.
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 2022—All Rights Divorce Lending Association
