The Importance of Divorce Mortgage Planning: Ensuring a Smooth Transition Post-Divorce

In the midst of a divorce, the focus often shifts to resolving immediate issues, such as distributing real property and assets. However, it's crucial to remember that life continues after the divorce. One of the biggest challenges is understanding how the various aspects of divorce overlap, particularly when real property is involved.

Key Considerations in Divorce Mortgage Planning

The solution isn't as simple as deciding who retains the marital home and who purchases a new property. Several issues need to be considered, including:

How spousal support structure affects qualifying income for an equity buy-out.
Details about the real property that impact available mortgage financing options.
How the phrasing in the marital settlement agreement affects the vacating spouse's ability to purchase a new home.

The Importance of Multiple Perspectives

Multiple perspectives are essential for a complete understanding of a situation. In a divorce, different views on various topics can affect the divorcing spouses in positive or negative ways. Consider these questions:

How would you calculate spousal support for a spouse with fluctuating income?
How would you handle spousal support vs. a lump sum payout?
How do you evaluate home equity and available home equity solutions?

While these questions may satisfy the parties during the settlement process, the answers could negatively affect mortgage financing.

Collaborating with the Right Team

Collaborating with a diverse and knowledgeable team results in better solutions. The right team includes a divorce attorney, financial advisor, mediator, divorce mortgage planner, and real estate professional.

The Vetting Process in Divorce Mortgage Planning

Vetting means conducting a thorough review of a person, document, property, investment, or solution. In divorce mortgage planning, vetting is crucial to ensure that the professional divorce team is reputable and knowledgeable.

Vetting the House: This is the first phase of divorce mortgage planning. The process goes beyond determining whether the property is marital or non-marital. It includes examining ownership, tax status, value, and equity available. The details discovered during the vetting process are critical to the divorce settlement process and can determine what type of mortgage financing is available.

Divorce Mortgage Planning and Real Property Detail Report

One of the most valuable reports a Certified Divorce Lending Professional (CDLP®) can provide is the CDLP® Divorce Mortgage Planning and Real Property Detail Report (DMPR). This report includes:

Ownership status
Deed type
Property tax
Valuation
ATROS (Automatic Temporary Restraining Orders)
Homeowner insurance
Existing mortgage(s)
Equity status

For example, if Mrs. Doe is to retain the marital home and refinance within six months post-divorce, the report will provide detailed information about the property's title, ownership, and mortgage options.

Why Pre-Approval is Essential

Obtaining mortgage pre-approval to purchase a new home has been common practice for many years. For divorcing spouses, an equity buy-out pre-approval is crucial. This ensures that the spouse retaining the marital home can obtain necessary mortgage financing, eliminating the fear of having to sell the home if financing is unobtainable.

The Role of a Certified Divorce Lending Professional (CDLP®)

A CDLP® brings tremendous value to the divorce team during the settlement process. Their understanding of family law, financial and tax planning, real property, and mortgage planning helps ensure a smoother transition for divorcing homeowners.

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.

For more information and to get started with divorce mortgage planning, contact a CDLP® today.

Disclaimer: This is for informational purposes only and not for the purpose of providing 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.