What Is Divorce?
Have you ever wondered, "What is the actual definition of divorce?" According to the Merriam-Webster Dictionary, divorce is the legal action of dissolving or terminating a marriage or marital union.
Divorce laws vary significantly worldwide, but in most countries, divorce requires the sanction of a court or legal authority. Divorce often involves the distribution of property, child custody, alimony (spousal support), child visitation, parenting time, child support, and the division of debt.
Divorce usually entails canceling or reorganizing the legal duties and responsibilities of marriage, thereby dissolving the bonds of matrimony between a married couple under the laws of the specific country, state, or county.
Why Understanding Divorce Matters for Mortgage Financing
The definition of divorce can significantly impact your ability to obtain mortgage financing now and in the future. If you plan to refinance the current mortgage on the marital home or purchase a new home post-divorce, seeking pre-divorce guidance from a Certified Divorce Lending Professional (CDLP®) can help you avoid many future obstacles.
Canceling or reorganizing your legal duties and financial obligations might seem straightforward, but your complete financial picture often changes, affecting your ability to secure home financing.
Key Considerations for Mortgage Planning During Divorce
What’s Your Exit Plan?
- Selling the Marital Home: Will you sell the marital home to rent or purchase a new property?
- Retaining the Marital Home: Will one spouse keep the marital home and either become responsible for the existing mortgage payment or need to secure new mortgage financing to buy the equity ownership share from the other spouse?
Pre-Divorce Mortgage Planning
Pre-divorce mortgage planning is a practical step when you know your marriage is ending. By planning ahead, you can ease the transition for yourself, your spouse, and your children.
- Selling the Marital Home: If selling the home and splitting the proceeds, where will you and your spouse live? Transitioning from a two-income household to a single income can strain your purchasing power, and aspects of the divorce settlement agreement can further impact this.
- Retaining the Marital Home: If you plan to refinance to buy the equity share from your former spouse, consider the financial constraints and how the property details might impact your ability to obtain mortgage financing.
Avoiding Common Financial Mistakes
Often in a divorce, the focus is on distributing property and assets, forgetting there is life after divorce. The biggest challenge is understanding how the various pieces of the divorce puzzle fit together.
Divorce Mortgage Planning is a holistic approach to evaluating mortgage options in the context of overall financial objectives related to divorce situations. Working directly with the divorce team, a CDLP® understands the intersection of divorce, financial and tax planning, real property, and mortgage planning. The role of the CDLP® 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.
The Value of a Certified Divorce Lending Professional (CDLP®)
Since 2014, Certified Divorce Lending Professionals (CDLP®) with the Divorce Lending Association have been helping divorcing homeowners make informed decisions about their home equity solutions. Divorce Mortgage Planning is a holistic approach to evaluating mortgage options within the overall financial objectives related to divorce.
What Does Holistic Mean?
A holistic approach means:
- Viewing something as a whole interconnected entity.
- Understanding the bigger picture.
- Thinking outside the box—or removing the box altogether.
Approximately 70% of what a Certified Divorce Lending Professional (CDLP®) does involves the mortgage itself. The remaining 30% involves collaborating with the divorce team on the settlement process, financial and tax planning, and real property considerations.
For example, the wording in the divorce settlement agreement, the structure of support income, and the division of assets can directly impact the ability to obtain mortgage financing. Correctly phrased agreements can improve borrowing positions for both spouses, whether one is purchasing a new home or refinancing the existing mortgage.
Conclusion
Who you work with and what they bring to the table will affect your success. Working with a Certified Divorce Lending Professional (CDLP®) during pre-divorce mortgage planning can help both spouses secure new mortgage financing post-divorce.
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.
This article is for informational purposes only and not for providing legal or tax advice. Consult an attorney or tax professional for 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.
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