When a couple makes the difficult decision to divorce, the stress of dealing with financial details related to the home can be overwhelming. Our mortgage experts can help sort out the home ownership and mortgage issues.
In this time when focusing on the future can be difficult, our professionals specialize in helping individuals learn more about choices they have regarding the home mortgage.
Questions that may need to be addressed:
- How is the title (ownership) to the home currently held?
- Will the marital home be sold?
- If not, who will retain possession of the home?
- How will the spouse leaving the home be compensated for the equity in the home?
- Can the spouse moving out of the home qualify for a new home?
- How will any equity accumulated in the home be determined and each party compensated?
- How can the equity be accessed if the home is not sold?
- Is a refinance necessary?
- What types of loan programs are available?
- Can the spouse retaining the home qualify for the refinance?
- What if one spouse has been out of the work force for an extended period of time?
Fair Value of the Home
The value of the marital home can be determined through an appraiser, who will arrive at the value after review of the home, thorough analysis of existing market conditions and recent sales. To avoid disagreements over value, both parties should agree on who will complete the appraisal and how to resolve any issues with the value when the appraisal is completed. We can provide referrals of established and experienced appraisers to provide you with this value validation.
Sale of the Home
If neither party wishes to remain in the marital home, or if neither party can qualify for a new mortgage on the home, sale of the home may be the only option. In this case, Guardian Mortgage Company can provide referrals to reputable real estate agents and help determine the estimated amount of equity available at various contract values. We can also assist any and all spouses in potentially qualifying for the purchase of a new home.
Retaining the Home
Without an Existing Mortgage:
If there is currently no mortgage on the home, a general warranty deed is the easiest way to transfer title from one spouse to another. An attorney can prepare this document and have it recorded with the county for a nominal fee.
With an Existing Mortgage:
Though a general warranty deed will transfer ownership of the home, the document does not remove the vacating spouse from the current or future financial responsibility on the mortgage if both spouses are borrowers on the existing mortgage. Only through satisfaction of the existing mortgage will the vacating spouse be free of this obligation.
Without such satisfaction, the spouse leaving the home will carry the liability of the mortgage on their credit record. They will also bear responsibility for any delinquency on the account. Carrying the additional debt may also affect their ability to qualify for future mortgage, auto and consumer financing.
Refinancing serves as a valuable tool to facilitate removal of the vacating spouse from any and all financing obligations on the marital home. We can assist in evaluating the refinance options available and determine the best loan program, structure and terms for the new mortgage.
Compensation for the Spouse Leaving the Home
Options for compensation for the spouse who will be changing residence will vary depending on available equity as well as the other assets and borrowing power of the remaining spouse.
If the remaining spouse qualifies for a new mortgage, a “cash-out” refinance with “owelty lien” or new
home equity loan may be used to compensate the vacating spouse by drawing cash out of the equity in the property. There are a variety of mortgage options for accessing the equity in the home. One of our mortgage professionals will help you determine the best solution given your specific financial condition.
If qualification for a refinance or new equity lien is not possible, compensation will need to be arranged through the liquidation or transfer of other marital assets.
Divorce and New Mortgages
Qualification for a new mortgage can be a challenge for divorced individuals. Alimony and child support payment often adversely affect one’s ability to qualify.
Payments of these items may affect qualification ratios, whereas receipt of these payments for less than an established period of time often disqualifies their ability to be considered as income on the new mortgage approval.
Guardian Mortgage Company professionals are experienced in the guidelines for documenting payment or receipt of alimony and child support and can provide clarity and support for the new mortgage process.
Senior Loan Officer, NMLS #166607
Guardian Mortgage Company, Inc.
AZ Loan Originator 0927054