Dividing Real Estate with a Divorce Mortgage

Divorcing the mortgage—or the house—can be a complex issue, especially for divorcing homeowners. Certified Divorce Lending Professionals (CDLP®) are frequently asked how to navigate these challenges.

The Complexity of Divorce and Mortgage Financing:

A CDLP® deals with all levels of divorcing homeowners. The more variables involved in a divorce case, the more complicated it can become. Many divorcing clients, both men and women, are often ill-prepared financially to obtain mortgage financing, even when the final settlement agreement requires one spouse to refinance the marital property.

Certified Divorce Lending Professionals can identify red flags through the divorce mortgage planning process, helping divorcing homeowners make informed decisions regarding their mortgage and home equity solutions.

Incorporating Mortgage Financing into the Settlement Process:

When real property and mortgage financing are involved, it’s about more than just the disposition of the property. The ability for either spouse to obtain future mortgage financing needs to be structured into the settlement process and final orders.

Common Challenges in Divorce Mortgage Financing:

The two most common reasons divorcing clients struggle to obtain mortgage financing are:

  1. Qualified Income: The lack of verbiage regarding income qualification in the final settlement agreement.
  2. Verbiage in the Final Settlement Agreement: Poorly worded agreements can hinder the ability to obtain financing.

Consulting with a qualified divorce mortgage planner during the settlement process rather than after the agreement is final can ensure successful execution and avoid potential Contempt of Court issues.

Risks of Not Involving a CDLP®:

Not involving a qualified divorce mortgage planner can lead to significant issues. The wrong mortgage option can undo tax planning done during the settlement process, and a lack of knowledge from the mortgage professional can result in the inability to obtain financing.

Benefits of Involving a CDLP® Early in the Process:

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.

Holistic Approach to Divorce Mortgage Planning:

Divorce Mortgage Planning is a holistic approach that evaluates mortgage options within the context of overall financial objectives related to divorce. Working directly with the divorce team, a CDLP® understands the intersection of divorce, tax, real estate, and mortgage financing. The role of the CDLP® is to help integrate the selected mortgage into long and short-term financial and investment goals, minimize taxes, reduce interest expenses, and maximize cash flow.

Disclaimer: This information is for informational purposes only and not intended as legal or tax advice. Contact an attorney or tax professional for legal and tax advice. Interest rates and fees are estimates and subject to market changes. This is not a commitment to lend. Rates change daily—call for current quotations. The information in this newsletter is prepared by an independent third party and distributed for consumer education purposes.

Copyright 2024—All Rights Divorce Lending Association

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