“In the divorce world, the higher rates have made it harder to ‘uncouple’ the mortgage. Refinancing to remove an ex-spouse’s name and pull out equity to pay a marital settlement has become much more costly at today’s rates, so the retaining spouse has a significant desire to preserve the rate on the current mortgage” according to Brett Leschinsky, Divorce Mortgage Specialist. Brett is featured in this blog regarding the Impact of Rising Rates on Homeownership and Divorce.
Cooperation Matters:
High conflict between the parties makes the divorce more difficult and more expensive. The same is true for uncoupling the mortgage. A cooperative couple will have more mortgage options than a spiteful couple. The ability to work together will allow more options when there are rising interest rates on homeownership in a divorce
Mortgage Options:
Navigating mortgage options requires careful consideration of various factors relating to the impact of rising rates on homeownership and divorce. Brett outlined four primary options and their suitability in different scenarios:
- Remove Name with Qualifying Name Delete Assumption (QNDA)
- Leave Both Names On
- Refinance to Remove Name
- Sell House
Each option offers distinct advantages and considerations, depending on the specific circumstances of the divorcing parties.
Do Qualifying Name Delete Assumption (QNDA) with rising rates on homeownership in a divorce.
Use this option when an existing spouse would like their name removed from the marital home loan. This is not always possible depending on the servicer of the loan. A 2nd mortgage may be needed to pay marital settlement to the exiting spouse.
Ask if you can qualify, and if there is time for a QNDA.
Leave the existing spouse’s name on the current loan and if needed obtain a second mortgage to pay marital settlement.
This is the best option if a QNDA is not possible and exiting spouse will allow their name to remain on the current loan. Even if a QNDA is possible, this option avoids the cost of a QNDA.
Refinance to remove an existing spouse’s name and pay marital settlement in one transaction.
Consider using this option when an exiting spouse requires their name to be removed and a QNDA is not possible.
While this option is the least favorable due to the lower rate being lost, this route has a silver lining. A refinance is quicker, it allows equity to be pulled out to pay a marital settlement at a lower interest rate than if they were to obtain a 2nd mortgage, it allows a higher debt ratio, it removes the exiting spouse’s name, it also allows co- signers if needed, etc
Sell house and divide proceeds according to decree.
This may be your best option when neither spouse wants to keep the house.
When the marital home is going to be sold, many times one spouse will want to purchase a new home as soon as possible but the other spouse is planning to rent. When this scenario occurs, there is an opportunity to help the spouse purchasing a home that shouldn’t adversely affect the other spouse, but takes some cooperation as well as specific language in the Judgement and Decree.
Forecast for Rates and Housing Market:
Looking ahead, projections suggest a potential decrease in mortgage rates, which could impact the housing market dynamics. Lower rates are likely to stimulate buyer demand, potentially reigniting competition and driving up home prices. However, the exact extent of these effects remains uncertain, contingent upon various economic factors and market conditions.
A Divorce Mortgage Specialist is a first call to make when contemplating divorce and there is a marital home. Having a professional who understands the complexity of divorce and your home is invaluable when making decisions about your future.
To learn more you can contact: Brett Leschinsky at CrossCountry Mortgage | NMLS# 334641 Mobile | Phone: 612-590-7896, Email: [email protected]
