What's one of the biggest frustrations when refinancing a home during a divorce? The timeframe in which it can be done!
Obviously, everyone involved wants the refinance of the marital home to be done as quickly as possible. The frustration is that depending on the borrowing spouse's financial situation; it might not be that easy.
When the borrowing spouse needs to use spousal support and/or child support to meet the income needs for refinancing a home during a divorce, the lender needs to meet certain requirements. We call it the 6/36 rule - 6 months receipt of income and 36 months continuance.
Nobody wants to wait 6 months to refinance the marital home, and the other spouse doesn't want to wait 6 months to receive their equity share either! So, how can we make this easier?
Temporary Orders
If the need to refinance the marital home once the divorce is final has a deadline, for example, the settlement agreement gives a deadline of 90 days – there may very well be an issue if support income is needed, right? We highly recommend getting temporary orders in place – it may not matter if the amount of support ordered is not going to be the final amount. Still, as long as the paying spouse pays in full and on time as per temporary orders, it starts the clock ticking on the 6 month receipt period!
For example, let's say that Mary has received 4 months of support through temporary orders of $800, and final orders are given for $1,000 monthly support. Mary only needs to show 2 more months' receipt of the support income to meet her 6 months receipt. She doesn’t need to show an additional 6 months receipt of the full $1,000 because the key point is that the $800 was considered full payment based on court orders. This also helps when the continuance of 3 years is tight, which still needs to be met, or if there is a specific deadline on when the refinance needs to take place like the 90-day example we just used for her.
Does Having a CDLP on Your Team Set You Apart? You Bet!
The takeaway is that every single case is different, and having your Certified Divorce Lending Professional (CDLP) as that extra set of eyes to review the proposed settlement agreement can help identify what hurdles exist, how they can be addressed ahead of time and save everyone a lot of frustration, time and sometimes heartbreak.
Do you have questions about how divorce can impact the ability to obtain mortgage financing? A Certified Divorce Lending Professional's (CDLP) knowledge and experience can help make the transition much smoother and successful for all parties involved.
Working with an experienced mortgage professional who is well versed in the many ways divorce affects the mortgage is a huge benefit to both the divorce team and the divorcing homeowners. You can't think traditionally when working with divorce and mortgage financing.
Always work with a Certified Divorce Lending Professional (CDLP) when going through a divorce and real estate or mortgage financing is present.
This is for informational purposes only and not to provide 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.
Copyright 2021 Divorce Lending Association. No portion of this post may be reproduced without the written consent of the Divorce Lending Association.
