Mortgage Options After Divorce
In the first of two articles, guest blogger, Tom Wells, licensed mortgage originator, highlights the key considerations divorcing individuals need to know about their mortgage options after divorce:
When the time comes to divide assets and liabilities, the roof over your head is not to be forgotten. A home is one of the largest investments that the great majority of people will ever have, and it is not always simple to divvy up. In many cases, extra thought must go into dividing your real property as there is often a mortgage involved.
Two Main Options. In cases where there is a mortgage on your home, you usually have two main options: (1) Sell the property and follow the divorce decree to distribute the sale proceeds, or (2) Refinance into one spouse’s name. If a refinance will be involved, then it typically will be either “rate and term” refinance or “cash-out” refinance. (I’ll go into more detail in a minute).
So, what should you do first? If you are awarded the house, typically, you will be faced with two main options. The first option is that a party is awarded the property and they refinance the property into their sole name (removing the other person) and no cash is taken out; meaning the equity stays in the home. This option is called a “rate and term” refinance. The second option also results in only one party’s name being on the new mortgage, however equity is taken out in the form of a “cash-out refinance”. The “cash out” frequently is used to pay a portion of the equity to the other party to make them “whole”. Generally speaking, the “rate and term” refinance and “cash out” refinance will be the options faced in most divorce situations – but please consult with your mortgage lender about other options or circumstances that may be unique to your circumstances.
Qualifying for Your Post-Divorce Mortgage. In my next article, I will address the key considerations involved in qualifying for a mortgage after divorce and some guidelines for estimating the likelihood you will qualify for a new mortgage based on your post-divorce income.
NOTES FROM BANFIELD COULING LAW & MEDIATION:
(1) THANK YOU to Tom Wells for this helpful information and series of articles, on this subject which affects many divorce individuals.
(2) CONTACT INFORMATION: Tom Wells, Mortgage Loan Originator (NMLS# 2047128) with Amerisave Mortgage, can be reached at TWells@AmeriSave.com.
(3) PLEASE NOTE: This blog is not intended to constitute legal, financial or tax advice. We do not recommend making important decisions of the type addressed in this article without specific legal or professional financial advice in advance. We at Banfield Couling Law and Mediation are here to help navigate your legal matter at any stage of your divorce.