Having just recently completed this process, I thought I would share with you the options one has when faced with divorce. There are many questions you might be asking at this time, particularly surrounding your home. We are here to help. Let’s first break down some of the basics.

“I think I want to stay in my home…what do I need to keep in mind?” First, take into consideration the size of the home, utilities, payments, family needs. Does staying in the home truly make sense? You will likely now be entirely responsible for the house payment, taxes, insurance, upkeep, maintenance and other related bills. Your household income may be decreasing, and your overall expenses may be increasing if you are subject to a court order for support, so it is important that you are aware and thorough in determining what your actual expenses will be in keeping and maintaining the home on your own.

“My spouse is entitled to share in the equity we have in our home…how is this handled?” The equity in the home needs to be determined by an appraiser – call us if you need a recommendation and referral. The appraised value less the eventual costs of selling (commissions and seller closing costs) equals the equity to be split between the parties. This is the amount you will be obligated to give to your ex-spouse. And in general, any money you or your spouse contributed to the home from your own pre-marital assets must also be accounted for in determining the final division of equity.

With the divorce, your spouse may put a marital lien on the property or there may be a court ordered mandate for distribution of the equity, possibly including interest on that amount. This means that you will likely have a specified amount of time to obtain the funds needed to give the ex-spouse their portion of the equity. This can be done by cashing out the equity in the home with a new mortgage, selling the home or by using other assets you have to “buy out” their stake in the home.

If you choose to stay in the home, you have two financing options to pay your ex-spouse. You can either refinance your home to get cash out, or you can obtain a new second mortgage or home equity loan. This is where you will want the advice of a trusted mortgage professional.

Even though you may now be applying for the loan without a spouse’s income – with your own good credit and income, you can usually qualify on your own. Often, child support and alimony is viewed as stable income, if it has been received for three months and is likely to continue for at least three years.

“What if I am the one leaving the home?” It is important to know that even though the divorce decree awarded the home to your spouse, you are still obligated for this debt in the eyes of the mortgage company.

Many people assume that by filing a Quit Claim Deed removing themselves from the title, they are no longer responsible for the mortgage. A Quit Claim Deed only eliminates your name from the title of the property, but not from the mortgage loan. The benefit of a Quit Claim Deed is that if the spouse on the title passes away, the property will go to his or her heirs rather than to the ex-spouse.

“How might this scenario impact my credit – and what can I do?” Unfortunately for many, divorce is a time of great financial hardship and credit challenges. Because you are obligated on the mortgage until it is paid in full or refinanced, it is imperative that the person responsible for the payment remains current. One possibility you have to remove your name from obligation is to contact the company which currently holds your mortgage, and ask to do a “Qualifying Name Delete Assumption.” This process will leave the existing loan in place, but would relieve the non-occupying spouse from their obligation on the loan. Give us a call, and we can explain more about this process, or help you determine if a refinance may make more sense instead.