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...
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:
Whether the divorcing couple is on good terms or bad terms getting divorced can be rough. It can be stressful, time-consuming, and confusing with all of the paperwork that goes into it. Chances are both parties are listed as shared parties on a lot of documents, including insurance policies.
How is the disposition of the marital home affected?
The person who stays in the marital home after the divorce will need to make sure that the homeowners' insurance is under his or her name. Likewise, the person moving out must make arrangements to purchase new homeowners or renters policy for the new residence. Previous insurance claims on the marital home may also cause problems and the property may be deemed uninsurable to new buyers.
Experts suggest that filing 2 claims within 3 years will subject an individual consumer or home to a significant risk of being rejected by insurance carriers.
What is a CLUE Report?
Collaboration | Working together to achieve a goal. A recursive process where two or more people or organizations work together to realize shared goals.
It takes teamwork to bring the typical divorce settlement together. There are usually quite a few people involved from divorcing clients, attorneys, financial planners, mediators, real estate agents, appraisers, and mortgage professionals.
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 property is the marital home and other real estate assets, having a Certified Divorce Lending Professional (CDLP) as a financial neutral on your team becomes increasingly desirable.
In many divorce settings, negotiations break down over financial issues or concerns, oftentimes leading to litigation. The CDLP is a financial neutral who offers both parties a balanced, thorough financial...
The marital home: typically one of, if not the biggest marital asset. The two most common ways to deal with the marital home is for one party to retain the home and pay the other party their share of the equity by refinancing the current mortgage. The other way is the home is sold and the parties split the net proceeds.
The name, Equity Buy-Out, confuses some people into thinking they have to purchase the house from the other spouse. An Equity Buy-Out is actually handled as a refinance loan, not a purchase loan. There are two types of refinances that need to considered. Just because the court orders one party to buy the equity out of the other party, that doesn’t dictate the type of refinancing category it will fall under and each one has its own limitation and requirements to be met.
The two types of refinances are either a Rate/Term refinance or a cash-out refinance. Rate/Term refinances typically have better terms with regards to lower interest rates and access to...
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 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 being able to look at a problem from different angels and draw 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 in a wise and reasonable way.
3 – Diverse Teams Fill In the Experience Gap | Experience mostly comes through time, but...
So, what now? You were awarded the marital home in the divorce but you’re not currently on the mortgage. How do you work with the Mortgage Holder going forward?
Assumption & Release of Liability | When a former spouse assumes ownership of the home and the mortgage, this does not always mean the mortgage lender will release the original borrower from their financial obligation or liability on the mortgage. A loan assumption is a transaction in which a person (the “assumptor”) obtains an ownership interest in real property from another person and accepts responsibility for the terms, payments ,and obligations of that other person’s mortgage loan. The assumptor is liable for the outstanding obligations and unless a release of liability is requested, the original borrower will remain liable as well.
Successor Homeowner’s Right to Information | Another sticking point for divorcing spouses who are awarded ownership of the marital home and who...
Avoiding Language Traps in Divorce Settlement Agreements That Could Affect Your Ability to Obtain Mortgage Financing.
We know it is important to be very mindful of the words used in a divorce settlement agreement in order to avoid any language traps and future conflict. Word choice can have an effect on the divorcing client’s ability to obtain mortgage financing as well. While it may not be top of mind to word the divorce settlement agreement to meet mortgage guidelines, it could significantly help divorcing clients to clarify certain terminology used in the settlement agreement.
The terms “alimony”, “maintenance” and “spousal support” are often used interchangeably to describe payments made by one spouse to another after a divorce. The terms may be identical in meaning but not necessarily in the eyes of an underwriter.
As an example: From a liability/debt perspective, FHA guidelines differentiate between alimony and maintenance while...
Under today’s economic conditions, especially with the job losses we’ve seen lately, many lenders and investors are choosing to raise minimum credit score requirements in an effort to minimize the risk of borrowers not being able to make their payments.
For now, the change in credit score requirements is simply a protection against default during a rough time in our economy. It’s uncertain as to how long the increased credit score requirements will last. But many of the big benefits of each loan program remain, while interest rates are still sitting at historic low levels.
Not only can divorce lead to emotional strain, but it can also cause all sorts of financial problems. All those shared accounts and co-signed loans that once seemed like a great idea are now the cause of major issues.
Don’t assume your clients will play nice and don’t assume they fully understand what happens with their credit during the divorce process. When joint credit is obtained,...
Is a Reverse Mortgage Right for Your Divorcing Homeowners?
Divorce has declined in the US for everyone except couples over the age of 50, whose rate has doubled since 1990.
Divorcing later in life is not a new phenomenon, but it is becoming more and more common. Indeed, the increased occurrence of “gray divorce,” as it’s called, has been identified as a significant 21st century divorce trend. Even though the overall divorce rate is actually declining, it’s on the rise among older generations.
Reverse mortgages were created specifically for senior homeowners, 62 years and older, who want to convert part of their home’s equity into loan proceeds. With not only the rising financial requirements of senior homeowners but when there is limited or fixed income in a divorce situation, reverse mortgages are becoming a popular option and tool to supplement income.
How can a reverse mortgage help your divorcing clients?
Flexible Payout Options can be a great...