Guest Blog: by Anne Geske a Residential Mortgage Loan Originator with C2 Financial Corporation
Typically, when one goes through a Divorce, they only ever hire an attorney. Unfortunately, they do not think about having a Team of Professionals to assist them in making sure they are protected in all areas of their finances. Attorneys focus on the assets and liabilities and dividing them between both parties. Emotions run strong in many divorces and many times one party has their heels dug into keeping the home no matter what. If the home is awarded to them, the other party will make a demand to refinance the home within a certain time frame or sell the home. This demand is made to get that person off the current mortgage and Title of the property. Many times, you are required to refinance and give the other party money to buy them out of the property. That all sounds good but some of the things to think about are:
1. Am I working, and will I be making enough money to support the new payment, taxes, insurance, HOA and maintenance on the home when it is time to refinance?
2. What is the current value of the home? Is there enough equity to buy the other person out and what are the consequences to taking the cash out of the property?
3. If I don’t need to take cash out of the property, is there enough equity to do the refinance and include the closing costs affiliated with a refinance?
4. If I am the one to stay on the mortgage and title until the other party refinances, will I be able to qualify for another home should I decide to buy?
In some cases, I will see one party coming off title and staying on the mortgage with a demand that the other person refinance within a certain time frame. This is not a good idea as Title shows ownership and being on the mortgage shows vested interest only. You do not want to be responsible for a loan and not even own the property. In addition, by remaining on the loan, you are taking a chance that the other person may or may not pay the mortgage payment on time. It is your credit that can be destroyed if the other person is careless and does not make the payments on time. Missing a Mortgage payment is the “kiss of death” to anyone’s credit.
The bottom line is that it is very important to meet with a Mortgage Professional prior to finalizing your divorce. It would be a shame to petition for the home only to find out that you need to sell it in the end. Once a divorce is final, there is no going back.