Divorce and Your Home

Divorce and Your Home: 7 Key Questions Answered by a Divorce Mortgage Specialist

The marital home may be one of the larger assets when getting divorced and can cause the most controversy. There are usually a lot of questions, so speaking to a Divorce Mortgage Specialist early in the process can help give peace of mind and set you down the best path for your unique scenario. Below are seven frequently asked questions on divorce and your home from Brett Leschinsky, Divorce Mortgage Specialist in Minnesota.

Can I Keep the House?

General, the spouse who can afford to keep making the mortgage payments after the divorce is the one who retains the home. If neither can afford it, the house is typically sold. If there are children involved and keeping them in the home is a priority, spousal maintenance can be provided to the spouse staying in the home, depending on incomes of course. Sometimes it’s obvious what needs to be done with the house, but many times it’s not. If your household income is going down and your expenses are going up (spousal maintenance, child support, paying for your own utilities, etc.) does it really make financial sense to stay in the house? It’s important that you be diligent in understanding what your income and debts will be after the divorce.

How Is the Home Equity Handled if We Both Share It?

When both spouses are entitled to a share of the home equity, you have two primary options:

Refinance the First Mortgage

To pay off the equity, a new, bigger mortgage must be taken out.

Obtain a New Second Mortgage

The equity amount may be covered by a second mortgage. Which choice is ideal for you will depend on important aspects like loan-to-value ratios, your credit score, and the value of the home.

Note: With the right language in your divorce decree, you can avoid additional interest rate increases when refinancing. Learn more about refinancing and divorce. Contact Brett to learn more about refinancing and divorce.

My Spouse Is Keeping the House. How Can I Remove My Name from the Loan?

There are 3 possible ways to remove your name off a mortgage:

1. Qualifying Name Delete Assumption: Keeps existing loan terms if your spouse qualifies to assume payments independently.
2. Refinance into Your Spouse’s Name Only: A full refinance to remove your name.
3. Sell the House: If neither option works, selling may be necessary.

It is important to note that a Quit Claim Deed only changes ownership and not loan liability. Your name will stay on the loan until one of these things is done to get rid of it.

Can I Buy a New Home if My Name is Still on the Old Loan?

If the right verbiage is written into the divorce decree, it is possible to qualify to purchase a new home without using the mortgage debt of the old loan. However, it is always preferred to remove your name from the old loan whenever possible. Mainly because if your ex-spouse misses any payments to the mortgage your name is still on, your credit will be affected negatively. Explore strategies for buying a home post-divorce.

Can I Buy a New House Before Finalizing My Divorce?

Possibly, but there are a few things to be aware of.

• Debt Qualification: you would have to qualify with the debt for your current home
• Marital Interest: Your spouse would have a marital interest in your new property because you are still married. Once the divorce is final, you would need your ex-spouse to sign a Quit Claim Deed granting you their interest in your new property.

Can Spousal Maintenance or Child Support Be Used as Qualifying Income?

Yes, however it must have been received consistently for a certain amount of time (depending on which loan type you are using) and it must also be documented to continue for a minimum of 3 years after purchasing the house.

WHY DO I NEED A MORTGAGE PROFESSIONAL WHO SPECIALIZES IN DIVORCE TRANSACTIONS?

Yes, spousal maintenance and child support can count as qualifying income if they meet certain conditions:

• Consistency: The payments must be received consistently for a set period, depending on the loan type.
• Duration: The payments should be documented to continue for at least three years after the home purchase.

Why Do I Need a Mortgage Professional Who Specializes in Divorce?

Mortgage transactions tied to divorce are very different from regular mortgages. Different lenders have different underwriting rules that many loan workers don’t know about. A split Mortgage Specialist can help you make sure that your mortgage plan fits your needs both during and after the split. There is a lot of information that you can get from talking to an expert early on in the process.

Contact Brett Leschinsky, Divorce Mortgage Specialist, at (612) 590-7896 to discuss your options for navigating home ownership in divorce.

Bridget Leschinsky is a CDC Certified Divorce Coach®