You get half. I get half.
There is more to address in a divorce settlement agreement than just the disbursement of net proceeds or equity ownership in a divorce situation.
A mortgage escrow account is designed to hold a homeowner's periodic payments for real estate taxes, mortgage insurance, and possibly homeowner's insurance. Mortgage escrow accounts normally build up large balances at times because of the timing of payments made from them. Any excess mortgage escrow account balances must be properly accounted for and then refunded after homeowners sell their homes.
Mortgage escrow accounts accumulate money over several months, usually from borrowers' prorated payments for their real estate taxes. In most parts of the country, counties require property tax payments on a semi-annual or annual basis, meaning escrow accounts tend to build up until taxes are paid.
If the home is sold before tax and insurance payments are made, there will most likely be funds remaining in the...
During a marriage, the financial identity of both spouses may become comingled due to joint bank accounts, joint credit cards, co-mortgagees, and more. Protecting yourself or your clients from financial identity theft during and after the divorce is final should be a top priority.
According to the Federal Trade Commission, identity theft falls into six major categories:
So, what now? You were awarded the marital home in the divorce but you’re not a borrower on the existing mortgage. How do you work with the Mortgage Holder going forward?
If you were awarded the marital home during divorce and will be refinancing the current mortgage into your name or if you will be keeping the existing mortgage as is - if you are not a current mortgagee (borrower) on the existing loan there are a couple of things to keep in mind.
When refinancing a mortgage into your name and you are not a current mortgagee, is not typically a problem. Whether your name is currently on the title to the home and if so for how long or your name is currently not on the title to the home may impact the type of mortgage you will be able to obtain. It is highly recommended that you speak with a divorce mortgage planning professional to determine your eligibility.
If the plan is to retain the existing mortgage as-is and you are not currently a mortgagee on the mortgage there...
Your perspective is how you see something regarding situations or topics, the appearance of things relative to one another.
Multiple perspectives are crucial to gain a complete understanding of a situation. For example, in divorce, different views on different topics can affect the divorcing spouses in different ways—either positively or negatively.
Take the following questions, for example:
Your perspective or solution to these questions may satisfy the parties during the settlement process; however, the answer may negatively affect either party when obtaining mortgage financing.
Collaborating with the right team players results in different perspectives and better solutions!
What's my property worth?
Often in a divorce, we are more focused on curing the problem at hand, i.e., distributing the real estate and assets, that we forget there is life after divorce. The biggest challenge is the lack of knowledge, understanding, and preparedness of how the various pieces of the divorce puzzle fit together and indeed overlap. You don’t know what you don’t know, and not being prepared can cause more damage than good.
Here are three financial mistakes to avoid when negotiating the marital home during a divorce settlement.
Being Emotionally Attached to the House
Don’t be married to the house. The marital home often brings an emotionally charged debate to divorce negotiations, which can impair good decision-making. Often, divorcing spouses that are emotionally attached to the family home don’t realize that they can’t afford to keep it. Yet, they fight tooth and nail to keep it, sometimes at the expense of retirement planning. Instead, try separating the...
One of the most important team members in the collaborative divorce process is the financial neutral. The financial neutral is an impartial expert in his or her field. When a primary asset of the marital estate is the marital home and other real estate assets, having a Certified Divorce Lending Professional (CDLP™) as a financial neutral on the divorce team becomes increasingly desirable.
In many divorce settings, negotiations break down over financial issues or concerns, oftentimes leading to litigation. The CDLP™, as a financial neutral, offers both parties a balanced, thorough financial evaluation of the current mortgage and future mortgage financing requirements and offers realistic solutions to obstacles in negotiations.
Depending on each individual situation, the CDLP™ can perform a variety of functions in a collaborative divorce, such as:
A professional divorce team has a range of team players, including the attorney, financial planner, accountant, appraiser, mediator, and yes, a divorce lending professional. Every team member has a significant role in ensuring the divorcing client is set to succeed post-decree.
Diverse skills allow the divorce team to think about a specific problem in a different, and often more strategic, way. By looking at a problem from different angles and drawing on a wealth of experience and knowledge from all team members, allows for innovative and creative solutions.
1 – Diverse Teams Fill In The Knowledge Gap | The reality is that no one knows everything. Teams solve problems faster when they’re more cognitively diverse.
2 – Diverse Teams Fill In the Perspective Gap | Perspective is the capacity to view or think about a situation or problem wisely and reasonably.
3 – Diverse Teams Fill In the Experience Gap | Experience mostly comes through time,...
One of the biggest financial (and emotional) decisions to be made during a divorce is deciding what happens to the marital home. Deciding what to do with the home during divorce might not be as simple as who keeps the property and who moves out.
If the divorcing couple is mediating the disposition of the marital home, the goal is to close the gap in the negotiation and ultimately come to a solution that works for both parties. This may be easier said than done when emotions, finances, and even children are involved.
From a financial perspective, there are usually two options on the table:
Option 1: Sell the marital home and split the proceeds.
Option 2: One spouse retains the property and compensates the other spouse for their share of equity ownership.
The second option can be achieved in various ways; however, the two most common are:
Where does a Certified Divorce Lending Professional (CDLP™) fit into the mediation process?
Mediation is a process in which a third person helps the participants in a dispute to resolve it. In order to resolve the dispute, the participants must negotiate a solution. Problem-solving is part of the negotiations. The process of mediation is the management of other people’s negotiations, and the mediator is the manager of the negotiations who organizes the discussion of the issues to be resolved. The more coherent and organized the process, the easier it is for the participants to arrive at solutions that are mutual and appropriate for them.
At the center of the mediation process is gathering the data (fact-finding), defining the problem, and developing options. When the subject matter is specialized as in negotiating the marital home, the cycle becomes specialized and may require the need for mediation support from a Certified Divorce Lending Professional (CDLP™).
“I can’t buy a new home if I’m still on the marital mortgage!” is often the statement made by the spouse leaving the marital home. Fortunately, this isn’t necessarily true.
In many divorce situations, the spouse retaining the marital home won’t qualify to refinance the current mortgage and the vacating spouse believes they can’t qualify to purchase a new home while remaining on the mortgage for the marital home.
This thought process seems rational; however, there are certain steps and verbiage to include in the divorce settlement agreement that can remove this obstacle. While many mortgage companies have their own guidelines or ‘overlays’ to investor underwriting guidelines, a Certified Divorce Lending Professional (CDLP™) will know how to handle Court-Ordered Assignment of Debt and the correct verbiage needed in the divorce settlement agreement or separation agreement.
When a borrower has an outstanding debt that was...