Should I stay or should I go?
Let's examine the three most-likely scenarios you will experience regarding your current home and divorce.
STAYING PUT - Refinancing your current mortgage
If the decision is you will remain in the current home there are existing circumstances that will determine your next move. If the current mortgage is in your name only, then there is a less likely need to refinance it. Even so, if today’s mortgage rates and terms are better, you may want to refinance to help better budget moving forward.
But, if the current loan is in both spouse’s names and/or you need money to buy out your former partner’s equity, then refinancing will likely be inevitable. Usually, there is an established date for when the spouse remaining in the home must pay the departing spouse their portion of the equity. This will allow you secure the deed to the home in your name alone.
A “cash-out” refinance could provide you with the needed proceeds to satisfy a property equity settlement. The refinance will also give you an opportunity to put the property in your name only to protect your future ownership interest and equity. A quitclaim deed is commonly used to remove a spouse’s name from the title in a divorce.
MOVING ON - Looking for a new home and a new mortgage
Leaving your current home is always a tough decision, but it may best to get a fresh start. With the move comes a decision to either find a temporary home to rent or look at buying a new home. Part of the decision on buying might include the remaining length of time you receive (or pay) alimony and/or child support. If any of these payments get below 36 months remaining for receipt, then that income cannot not be included when qualifying for a mortgage.
With the help of a mortgage professional you can determine your ability to qualify for a mortgage (and how much). This could help with decisions made during the divorce negotiations.
SELLING THE HOME - usually a last resort
A divorce agreement might require the sale of the home and the splitting of profits if the couple doesn’t meet a deadline to refinance the mortgage into one spouse’s name. If neither spouse can afford the mortgage on their own, they may have no choice but to sell. It may be in everyone’s best interest to get rid of the place, pay off the mortgage, collect their share of the profits and start fresh.
In addition, if there’s a dispute over how much the home is worth, selling it is the best way to get the answer.
SUMMARY - In all three scenarios above, there will most-likely be a need to obtain a mortgage post-divorce. For you protection, it would be best to know what is needed to qualify for a loan before the divorce negotiations are complete. We can provide you with several different mortgage proposals that will help you understand if you can get a mortgage and for how much.