Divorce is a time of tremendous emotional upheaval, so it’s only natural that people facing a breakup of their marriage want to cling to whatever feels the most solid to them. For many of my divorcing clients that source of comfort is the family home.
For most couples, their house is the biggest single investment they’ll ever make. That fact alone, however, may not be enough reason to keep the house post-divorce. Consider a few pros and cons:
If you keep your house and you and your spouse are both obligated on the loan, you will almost certainly need to refinance the mortgage. A court order will NOT remove one spouse from that obligation, so a new loan is usually the only way to take one person’s name off. And given current trends, the new loan will likely have a higher interest rate than the existing one.
If you must refinance the mortgage, you will need to “qualify” for the loan.
- A lender will look at whether you are a good risk, which means, among other things, evaluating your income. If you want the lender to include your child support and maintenance payments as part of your income, you must be able to show that you have received this income for six consecutive months before the loan can be closed, meaning you need to make sure your divorce decree gives you enough time before you are obligated to refinance.
- Lenders also want to be assured that you are receiving maintenance and child support for at least three years past the time you receive the loan.
- The schedule of maintenance payments in a settlement you are to receive should take these requirements into account to make sure you can use this income as qualifying income for a loan.
- A good credit history is necessary to obtain a loan, often a challenging requirement for separated and divorced people. Your credit rating may take a hit during a divorce because you may have more bills and some of those bills may not be paid on time. Contact credit reporting companies to find out your credit score. Women often lose their credit history when they marry and change their names or creditors may report accounts only in the husband’s name.
Consulting with a mortgage broker before you conclude your case is often a critically important step. Keeping the house usually means buying out the other spouse. If your house has significant equity (the difference between the house’s value and the mortgage balance), you may have to come up with a substantial payment to your soon-to-be-ex.
The family law attorneys at Paule, Camazine & Blumenthal can discuss with you all of your options for the marital home to help you decide what makes the most sense for your financial future. If you have any questions, contact our family law attorneys to discuss your case.
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