What is Divorce Mortgage Planning? Divorce Mortgage Planning is a holistic approach to the process of evaluating mortgage options in the context of the overall financial objectives as they relate to divorcing situations.
The CDLP™ (Certified Divorce Lending Professional) works directly with the professional divorce team such as the attorney, financial adviser, mediator, etc., to help integrate the mortgage selected into the overall long and short-term financial and investment goals, to help minimize taxes, to minimize interest expense, and maximize cash flow.
When mortgage financing is needed as part of the divorce settlement, working with a Certified Divorce Lending Professional, can make the process smoother and provide more successful outcomes for the divorcing homeowners. Understanding the various phases of divorce mortgage planning is key.
There are 4 phases to the CDLPs model for divorce mortgage planning.
There is a lot of confusion and misunderstanding about equity buy-outs during a divorce. Is it a mortgage or is it a process?
An equity buy-out is a process of acquiring the equity ownership of an existing legal owner of real property. Acquiring the equity ownership in the marital home from an ex-spouse is most commonly done by refinancing the existing mortgage.
When a divorce involves refinancing the marital home, divorcing borrowers typically are looking to pull equity out of the home in order to buy out the other spouse’s equity ownership. Although the divorce settlement agreement may outline the details of the transfer of ownership, it does not determine what type of financing is available for the divorcing borrower.
The name, Equity Buy-Out, confuses some people into thinking they have to purchase the house from the other spouse. This isn’t true, an equity buy-out is actually handled as a refinance loan, not a purchase loan. Now, there are two types...
One of the biggest decisions divorcing homeowners face is what to do with the marital home and real property. Trying to agree on how to handle the mortgage and the home can be a challenge without proper direction from a Certified Divorce Lending Professional (CDLP™).
The options available depend on a number of factors, such as how the property was financed and how ownership is currently held. Additional factors to take into consideration include the disposition of property, the amount of equity available in the property, and the income sources available for the borrowing spouse.
There are many common mistakes made during divorce when working with a mortgage professional who does not fully understand the implications of divorce and the opportunities to help the divorcing homeowners with their mortgage financing. Two of the more common mistakes made are as follows:
Mistake #1 - "If the couple has equity in the home, the spouse keeping the house should apply...
As a divorce mortgage planner, a CDLP™ is often brought in to work with a client who is going through a divorce. Typically, one of the divorcing spouses would like to retain the marital home while the other may wish to purchase a new home. Here is a list of 5 things you should know about getting a mortgage either during or after the divorce. Divorce mortgage planning is very different than traditional mortgage lending and you will be better served working with a Certified Divorce Lending Professional (CDLP™) who has the required background knowledge of divorce.
#1. Timing of Filing Divorce Petition
The timing of filing a divorce petition with the court has a direct impact on mortgage financing. When a petition for divorce is filed, most mortgage lenders will require a finalized divorce settlement agreement ordered by the court in order to complete and close a new mortgage application and/or loan.
Why? Because many things can change during the course of...
Can I Buy a House While Going Through a Divorce?
You have to live somewhere after the divorce, right? And most homeowners would prefer not to go backward by becoming renters again. While many divorcing couples may not be in a financial position to consider buying a new home during the divorce, those fortunate enough to have good credit and what appears to be adequate income to buy a new house before the divorce is final may still find the road to homeownership a little bumpy.
Here are three areas of concern to address when buying a home during the divorce process:
Who owns the property?
In most states, all property purchased by either spouse during the marriage (i.e. until the final divorce decree is entered) is considered to be “marital property”. Marital property is subject to “equitable division” in most divorce cases. If the wife purchases a new home to live in while a divorce action is pending, the title to the new home might be in her name only. But the...
How does the spouse who is awarded the marital home yet is not on the current mortgage gain access to information about the current mortgage? This isn’t as easy as you may think!
We all know that often only one spouse is on the current mortgage to the marital home. A mortgage is a legally binding contract, separate from a divorce decree. The original agreement between the lender and consumer cannot be modified by the court.
So what happens when the spouse who is awarded the marital home isn’t on the current mortgage and has no plans to refinance the home immediately into their name? The spouse becomes what’s known as a Successor of Interest.
Successor Homeowner’s Right to Information | Another sticking point for divorcing spouses who are awarded ownership of the marital home and who are not currently obligated on the existing mortgage is the hurdle of obtaining information on the current mortgage.
Two important sets of CFPB amendments to its RESPA...
Obtaining mortgage preapproval to purchase a new home has been common practice for many years. A preapproval shows the home seller that the buyer has the financial strength to obtain mortgage financing to successfully complete the purchase transaction. The mortgage purchase preapproval is one of the first steps required for homebuyers and it should be one of the first steps for a divorcing spouse before agreeing to refinance the marital home.
Equity Buyout Preapproval should also be required by the spouse retaining the marital home if new mortgage financing is required. A refinance due to a divorce is required to remove the vacating spouse from the current mortgage or when the in-spouse needs to buy the equity ownership from the out-spouse in cash form.
When divorcing couples decide to call it quits one of the first things they think about is ‘what to do with the marital home?’. Should we sell it? Will one of us keep it? What’s it worth?
Obviously, assessing the value of the marital home and other real estate owned in a divorce is a big deal in the settlement process. The question is how to best determine the value.
How do we determine the value of the real property? Should we have an appraisal done or should we ask a real estate professional? It actually depends on what you might do with the property so understanding the difference between an appraisal and a Comparative Market Analysis (CMA) is important.
The two most common methods for assessing the value of real estate are obtaining an appraisal from a licensed appraiser or having a real estate professional provide a CMA— but what’s the difference between the two? To start, both methods are an opinion of value and no two will ever give you the same...
What is Divorce Mortgage Planning and how can a CDLP™ bring value to the professional divorce team?
Divorce Mortgage Planning is a holistic approach to the process of evaluating mortgage options in the context of the overall financial objectives as they relate to divorcing situations. The role of the CDLP™ is to help integrate the mortgage selected into the overall long and short-term financial and investment goals, to help minimize taxes, to minimize interest expense, and maximize cash flow.
Take a traditional IRA for example:
While the 'equal' exchange of marital assets may seem fair and equitable on paper, it may not be. The marital home comes with the opportunity of future appreciation while the traditional IRA not only comes with appreciation but the possibility of a future tax liability when Mary starts withdrawing...
How do you divorce the mortgage - or the house, for that matter? That is a question asked of many Certified Divorce Lending Professionals (CDLP™).
Though a CDLP™ deals with all levels of divorcing homeowners, the more variables involved in a divorce case, the more complicated it can be. Many times a CDLP™ will face divorcing clients, both men and women, who are ill-prepared financially to obtain mortgage financing - even when the final settlement agreement states that one spouse is to refinance the marital property.
Certified Divorce Lending Professionals can help in these situations by spotting red flags through the divorce mortgage planning process and helping divorcing homeowners make a more informed decision regarding their overall mortgage and home equity solutions.
When the case involves both real property and mortgage financing, it also involves much more than the simple disposition of the property. The ability for either spouse to obtain...