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Unfortunately, it’s a well-known fact that divorces can be very messy. In fact, according to the Office for National Statistics, the most common reason for divorce in 2017 was unreasonable behaviour, which can often be very chaotic, and things can get even more troublesome when you add a mortgage into the equation. This is why the team at Twin Pine Mortgages have put together our list of tips for juggling a mortgage and divorce.
Compensating your partner
There are multiple paths that you may decide to go down when it comes to juggling your mortgage and divorce, but the first instance that we are going to look into is a 50/50 split. If you have agreed upon a 50/50 split, and you are keeping the house, then you will have to buy out your partner. This, of course, can sound very daunting, but in most cases, a cash-out refinance option can provide you with the money needed to compensate your ex for their share of the equity.
However, in order for this to work, you must make sure that you have carried out preliminary checks to determine whether you are able to qualify for the loan on your own. In addition to this, you will also need to ensure that the home has the necessary equity in it to cover this buyout.
However, if, in the unfortunate instance you find you do not qualify for these checks, there are people that can give you advice. An experienced loan originator, for example, will be able to look at the other options available to you, such as a home equity loan or a home equity line of credit.
Removing your ex from the mortgage
The next step would be to remove your ex from the mortgage. This can be a difficult process, especially if you are amongst the 52% of wives or 37% of husbands who petitioned for divorce on the basis of unreasonable behaviour (Office for National Statistics, 2017). However, it is crucial that you understand that all names on the mortgage, whether that’s yours or your partners, have a legal responsibility for the property.
So, if you are the person who has left the house, you must make sure that your name comes off the mortgage, as failing to do so could affect your credit score and your debt-to-income ratio. Whether you are the one leaving, or you want to take your partner’s name off the mortgage, you will need a mortgage lender to do this, so we advise you to do your research.
If you are removing your partner’s name from the mortgage, you can talk through your options with your mortgage lender, who will advise you on what is available to you based on your income, equity and credit score. If you would like more information on this subject, feel free to contact us today for a quick chat.
Selling the home
If neither you nor your spouse can qualify for the mortgage independently, or neither of you wants to retain ownership, then the home may need to be sold. However, it’s important, in this instance, to remember that there are costs associated with selling, so you will need to account for the estate agent’s fees, the cost of repairs and any additional tax liabilities. If you have decided to sell the property, then it’s also important that you have your agreement written in your divorce documentation.
Unfortunately, divorces can be a very sad and stressful process, but we hope that this blog has helped to provide some clarity on the options you have for your property. If, however, you would like to discuss anything in more detail, feel free to contact the team at Twin Pine Mortgages. Alternatively, for more blogs, you can browse our selection of blogs here.