"I can't buy a new home if I'm still on the marital mortgage!" is a common concern expressed by spouses leaving the marital home. Fortunately, this isn’t necessarily true.
In many divorces, the spouse retaining the marital home may not qualify to refinance the current mortgage, leading the vacating spouse to believe they can't purchase a new home while still on the existing mortgage. This thought process seems logical; however, certain steps and specific verbiage in the divorce settlement agreement can eliminate this obstacle.
Handling Court-Ordered Assignment of Debt
While many mortgage companies have their guidelines or ‘overlays’ to investor underwriting rules, a Certified Divorce Lending Professional (CDLP®) understands how to handle Court-Ordered Assignment of Debt and the necessary verbiage for 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, it creates a contingent liability. Proper handling of this contingent liability can prevent the lender from including it in the borrower's recurring monthly debt obligations.
Why Working With a CDLP® Is Essential for Your Marital Mortgage
The key is to work with a knowledgeable and trained divorce lending professional. A Certified Divorce Lending Professional (CDLP®) understands the specific requirements for handling contingent liabilities. Hidden issues, such as title requirements and payment responsibilities of the liable spouse, can lead to denied mortgage financing if not properly addressed.
The CDLP® provides significant value to the divorce team during the settlement process. Their expertise in family law, financial and tax planning, real property, and mortgage financing allows them to better support and assist the divorce team and divorcing homeowners.
Benefits of Working With a Certified Divorce Lending Professional
- Expert Guidance: A CDLP® can navigate the complexities of divorce and mortgage financing, ensuring smoother transitions and successful outcomes for all parties involved.
- Specialized Knowledge: Understanding the nuances of contingent liabilities and how to handle them in divorce agreements.
- Holistic Approach: Incorporating Divorce Mortgage Planning into the divorce settlement can help both spouses secure new mortgage financing post-divorce.
Take the Next Step
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 organize, prepare, and understand your mortgage financing options, 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
As a divorce mortgage planner, the CDLP® helps divorcing homeowners make informed decisions regarding their home equity solutions while assisting the professional divorce team in identifying potential conflicts between the divorce settlement, home equity solutions, and real property issues.
What is Divorce Mortgage Planning?
Divorce Mortgage Planning is a holistic approach to evaluating mortgage options within the context of overall financial objectives related to divorce. A CDLP® works directly with the divorce team, understanding the intersection of divorce, tax, real estate, and mortgage financing. Their role is to integrate the selected mortgage into the long and short-term financial and investment goals to minimize taxes, interest expenses, and maximize cash flow.
Involving a CDLP® Early in the Process
Engaging a Certified Divorce Lending Professional (CDLP®) early in the divorce settlement process can set the stage for successful mortgage financing in the future. Ensure a smoother transition and better financial outcomes post-divorce by incorporating expert mortgage planning into your settlement.
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.
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