Though it’s obviously an emotional process, a marriage that ends in divorce requires careful consideration of the division of a couple’s assets and liabilities. Often, the home is the largest asset and the related mortgage the most significant liability in a marriage. One way to divide the equity in a home is to simply sell it, split the proceeds, and perhaps look to buy a new home if possible. The other option is to buy the departing spouse’s share of equity in the property and refinance alone.
So what should be taken into consideration in either circumstance?
Agree in writing on your Marital Settlement. To establish a game plan and negotiate a
Marital Settlement that works, consider discussing your mortgage situation with us by contacting one of our Loan Offers as one of your first steps. Treat it like a pre approval. And find a real estate agent who can perform an initial assessment of value on your home, regardless of whether you plan to sell or not. Too often we hear from customers after they have already agreed on terms.
Though your marriage need not always be finalized by a court to proceed with a refinance, information pertaining to spousal and child support and division of liabilities is critical. Note, too, that any support payments made to the other party will be viewed as a debt, the same as a vehicle or student loan payment.
As part of your meeting with us, review a copy of your credit reportto check your score and review other liabilities that may need to be split. Credit scores over the past five years have been increasingly important to determine eligibility but also to determine if
additional costs will be incurred.
Refinancing to remove a spouse will require you to qualify based on income, credit scores and equity in the home. We’ll need pay stubs, W2s, tax returns and the Marital Settlement Agreement. Recognize, however, that we’ll usually need a minimum of six months’ history for support payments before it can be considered income for underwriting purposes.
Once you’ve been qualified on income and assets, we will obtain an appraisal to determine the current value of the home. The value of the home will determine eligibility to refinance and may also resolve the equity owed to the departing spouse, though some couples request a separate appraisal outside of the mortgage process to determine value.
At closing of the refinance, the departing spouse will be required to sign a Quit Claim Deed to remove his/her name removed from the property and to protect the credit of both parties. If the departing spouse failed to pay other debts, a lien could be placed on the home. However, while this action takes the departing spouse off the house’s title and leaves it in the one name only, it does nothing to remove their name from the existing mortgage until it is paid off by way of a sale or refinance.
When you’re prepared, the process should be no longer than any other refinance – in today’s market an estimated 45 days. Refinancing after a divorce could be the first step in helping you regain control of your life while also protecting yourself and your credit.