Divorce and Your Mortgage
Probably one of the last things you want to focus on when you are in the midst of a divorce is a mortgage refinance. But often times it’s necessary because the assets are going to be divided. One person will either keep the home, or it will be sold. More often than not one person will attempt to keep the house, which is why it’s very important before the divorce is finalized, that both parties talk to a mortgage professional and identify their ability to take on the debt by themselves. It’s not a fun discussion, but with the right assistance and planning, it can be relatively easy, so here are some things to consider prior to filing and during the proceedings:
Financial Status
If both parties have the foresight to plan for the division of assets prior to filing it can make it much easier. A divorce is separation can negatively affect financial standing when there is animosity, this is one of the things you should attempt to avoid. If both parties allow their credit to suffer by intentionally (or unintentionally) missing payments they feel the other party should pay, this could be a serious detriment when one person goes to refinance the mortgage. I would recommend maintaining some semblance of teamwork through this part of the process.
What I Can Afford vs. What I Think I Can Afford
There is a distinct difference between these two things, often times one party assumes they can afford the mortgage based on their income and the current payment. When you go to refinance a mortgage it is an entirely new loan with new calculations. These calculations will be based off the individual applying, not the joint household income. So if you feel comfortable with the existing mortgage payment, please understand this will change due to the current market and what you owe at the time of divorce. It is a very good idea to see what loan options are available to you at this time.
Decide Ahead of Time if You Want To Retain the Home, or Sell it
This decision can make the entire process much easier if it’s agreed upon early enough. You may want to consult a list of recommended professional to assist with this. It’s ideal if you can amicably resolve the situation without the use of legal representation.
When to Act
A divorce comes in many stages, depending on the level of cooperation. One of those stages will be the final settlement agreement. This is the document lenders require because it outlines the division of assets and bills. A mortgage will want to take into consideration what monthly debts you have, included in these debts are the following:
- Any existing mortgage payments you are responsible for or will be responsible for
- Credit card payments
- Auto Payments
- Student Loan Payments
- Child Support
- Maintenance Payments to a spouse
- Personal Loans
- Recreational Loans (RV/Boats)
Because the final hearing will decide who pays what bill, a mortgage company will want the final recorded agreement so they know what bills you are accountable for. For this reason we typically start a divorce refinance around the time our client expects the final hearing to take place. We can start the loan prior to the hearing, but must finish it after this final agreement is recorded. If there is a lump sum of money to be paid from the mortgage refinance client to the other party, sometimes the mortgage company will be want to see this has been satisfied. An example of this would be if the mortgage client is required to pay a sum of money from their 401(K) to the other party, the lender will want to see the funds dispersed to them and an updated 401(K) statement to reflect accurate balances.
Other Things to Consider
Aside from the aforementioned details, there are some general things to consider during this process. If you are to refinance the house, likely the spouse is a part of the mortgage loan and title. A quit claim deed is a document the title company will produce that removes the ex-spouse from the property during the refinance. There is typically a small fee of around $105.00 to do this in addition to the standard refinance fees.
The removed spouse will also have to sign several documents, because Wisconsin is a community property state (consult your attorney for the definition) the spouse will have to acknowledge and consent to their removal. So it’s good practice to expect some of the refinance will be taking place jointly.
I hope this article has been useful during a difficult time in your financial and personal life. Please feel free to use the information below to assist yourself in contacting me, or someone you trust, to help you.
What Can I Do Now?
You can Sign up for mortgage rates here
Read the About me section and learn more about how I conduct business
reviews are a great way to see who you are dealing with
if all that checks out you can apply here
Justin Scott
Loan Officer
NMLS 878581
- C) 920-530-4484
- O) 920-490-8823
- F) 920-490-8967
Executive Mortgage
NMLS 271650
909 . E Walnut Street
Green Bay WI 54301