Divorce Mortgage Planning and Real Property Detail Report
Undeniably, one of the most valuable reports that a CDLP® can provide the divorce team with is the CDLP® Divorce Mortgage Planning and Real Property Detail Report (DMPR).
This report provides the divorce team with details about the real property, including ownership status, deed type, property tax, valuation, ATROS, homeowner insurance, existing mortgage(s), equity status, and more.
For example, here is a snapshot of a small portion of the Real Property Details Page where Mrs. Doe will retain the marital home and refinance the existing mortgage into her name within six months post-divorce.
Stating the obvious – we have real property jointly owned by Mr. and Mrs. Doe. Looking deeper into the details of this small snippet of information, we find that title is held as Tenancy by the Entirety, which is severed and defaults to Tenancy in Common with no right of survivorship upon the entry of divorce. Rarely do we see this addressed, as it is presumed that title vesting will be changed when Mrs. Smith refinances the property in six months. However, there is a six-month window of non-joint tenancy. What happens should something happen to Mr. Doe during this window? His ownership interest will not default to Mrs. Doe but into his new estate and/or probate.
From a divorce mortgage planning perspective, we can also see that Mrs. Doe has been on title to the home for the previous 12 months. This detail determines what mortgage options are available to the borrowing spouse because of the property details and has nothing to do with her credit or income qualification. If Mrs. Doe had not been on title to the home for the previous 12 months, mortgage financing options would limit her access to equity above an 80% loan to value. For example, let's assume that there is 30% equity in the home and Mr. Doe is to receive 15% of the available equity. If Mrs. Doe is not allowed to borrow above 80% of the home's value, she would not be able to execute the equity buy-out for the complete 15% with proceeds from the new mortgage.
Additionally, this report breaks down the financial details of the proposed borrowing spouse, including income and debt analysis from a mortgage planning perspective. This is valuable information to the divorce team because not all income sources may be qualified income from a mortgage planning and approval perspective.
Depending on whether the divorcing homeowners are looking to refinance or purchase post-divorce, the DMPR provides up to four finance scenarios and options to address various equity buy-out options and/or purchase scenarios.
The CDLP® Divorce Mortgage Planning and Real Property Detail Report provides all divorce team members with an enormous amount of information invaluable to helping the divorcing homeowners make more informed decisions regarding their home equity solutions.
For decades, potential home buyers and mortgage borrowers have gone through a vetting process by the mortgage lender to reduce the risk of default. 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 and can complete the purchase transaction. The mortgage purchase preapproval is one of the first steps for homebuyers, and it should be one of the first steps for a divorcing spouse before agreeing to refinance the marital home.
Equity Buy-out Preapproval should also be required by the spouse retaining the marital home if new mortgage financing is required. For example, a refinance needed to remove the vacating spouse from the current mortgage or when the retaining spouse needed to buy the equity ownership from the out-spouse in cash form.
Divorce Mortgage Planning is the ability to put into play the desired outcome by pairing the needs and options available while incorporating the necessary details and clarity into an executable settlement agreement to successfully obtain closure and peace of mind. Vetting the divorce mortgage planner involved is another crucial step.
Working directly with the divorce team as a supporting member, a CDLP® incorporates divorce mortgage planning into the overall process with a unique understanding of the intersection of family law, financial and tax planning, real property, and mortgage planning when real property is present.
Would you like a sample demonstration of the Divorce Mortgage Planning and Real Property Report? Contact us today!