Divorce and Real Estate
By Marty Pottinger – Realtor with Realty ONE Group Ultimate
When going through a divorce, one of the largest areas of concern is what to do about the house. Many things need to be considered when the couple decides their current and future housing. To make the best decision, individuals need to discuss the issue not only with their lawyer but often with a tax professional, financial planner, and real estate professional, as well.
Why you need to meet with a real estate professional before you make any decisions about your house…
When you’re going through a divorce, your decisions are often heavily influenced by your emotions. When it comes to your house, this is very often the case. If you have children, you may want to stay in the house to help things remain as usual as possible for the children. You may feel that you are losing so much that you just can’t bear to lose the house too. On the other hand, you may want to be out of the house so that you can get a fresh start without being reminded of the past. Whatever the situation and whatever your emotions, you’ll need to have an outside observer who can help you look at the position to decide what will be best.
You need to meet with a real estate professional before you make any decisions regarding your home. If you want to keep the house, you will need to make sure that you will still afford the home after the divorce is final. If you plan for your spouse to keep the house, you’ll need to know how to make sure that you are no longer held responsible for the mortgage on that home. Whatever the decision, you’ll want to see you’ve made a well-informed decision.
If you want to keep the home…
If you want to keep your home, you will need to determine whether you will be able to afford it after the divorce is final. Many elements need to be considered before this decision can be made. A real estate and mortgage professional can assist you in looking at your budget to see if you will be able to afford the home by looking at your current income and expenses and anticipated alimony and child support payments. If you want to keep the house, you need to be aware that you need to look at more than just your current mortgage payment when determining whether or not you can afford to stay in your home. You also need to take into account the taxes and insurance associated with the property, as well as any money that will be needed for repairs and upkeep. Additionally, depending upon the divorce agreement with your ex-spouse, you may not be able to stay in your current mortgage.
If your spouse is entitled to a share of the equity, you will need to come up with the funds to buy out their share. Unless you have other funds that you can use to buy out your spouse’s share, you will either need to do a cash-out refinance or take out a home equity loan. Your real estate and a mortgage professional can help you determine which of these options would be best for you. Even if you have other funds that you plan to use to buy out your spouse’s share, you may find that it would be a better option to refinance or take out a second mortgage. These decisions can only be made once you have looked at all of your options and considered your entire financial situation.
Another reason that you may need to refinance would be because your spouse wants their name removed from the mortgage. You may be able to negotiate a “Qualifying Name Delete Assumption” with your current mortgage lender to take your spouse's name off of the mortgage. However, this is not always possible, and in many cases, a refinance will be necessary.
If your spouse is keeping the home…
If your spouse is keeping the home and will be taking responsibility for the mortgage, you need to make sure that your name is removed, not only from the deed but also from the mortgage. All too often, people assume that a Quit Claim Deed or a divorce agreement relieves them from the responsibility to pay on the mortgage. Regardless of what your divorce agreement states, if your name is still on the mortgage, you will be held responsible for the payments. If your spouse does not make the payments or is late on those payments, it will affect your credit, and the mortgage company will come after you for the money. Make sure that you talk to a mortgage professional regarding your options for making sure that all matters regarding the mortgage on your former home are correctly handled.
If you plan to sell the home…
In many cases, both spouses wish to give up the home for various reasons. In other instances, one spouse may have intended to keep the home but later discovers that it will not be financially possible to do so. In either case, decisions will need to be made regarding how to sell the home and what to do with the proceeds resulting from the sale.
Once you have decided to sell, you will also need to determine where you will be living once the sale is final. Again, a real estate professional can help you to look at your budget and make decisions regarding what housing options you will have available to you. It is best to meet with someone first so that you will have all the necessary information available to you before you begin your search for a new home.
Your real estate and mortgage professional can also help you to figure out when you will be able to qualify for a new house. In many cases, you may not be eligible until after the divorce is final and your name is removed from the mortgage. If you are planning to use alimony or child support payments as a qualifying income, you will need to have received these payments for six months and prove that you are likely to continue to receive these payments for at least three years (Selling Guide Fannie Mae, 2020).
Whether you plan to stay in your current home or move on to somewhere new, I can help you to make the best possible decision for your circumstances. When it comes to divorce, be sure to consult with professional legal, financial, and real estate advisors before making any decisions regarding your home.
by Marty Pottinger – Realtor with Realty ONE Group Ultimate
247 South Broad Street
Grove City, PA 16127
Direct: 724-264-5274 – Office: 724-201-0514
www.MartyPottinger.com
Disclaimer: The information presented in this article is not to be taken as legal advice. Every person's situation is different. If you are facing a legal issue of any kind, get competent legal & accounting advice in your State immediately so that you can determine your best options. Opinions are my own and not the view of Realty ONE Group Ultimate or its Affiliates.