There’s no reason to skate around the topic. Divorce is a messy process. In fact, it is ranked as one of the most stressful situations a person can go through, and it can impact virtually every part of a person’s day-to-day life.
If a homeowner is in the middle of a divorce and they have a mortgage, the mortgage is going to play a huge role in the proceedings. Even though the tips here will not prevent the high levels of emotional stress that go along with the end of a marriage, the information here can be helpful.
Determine the Home’s Value to Figure Out the Equity
Home equity refers to the home’s appraised value minus the liabilities. Selling a house is one of the fastest ways to determine total equity, but in most cases, this won’t be possible before a divorce occurs. In this case, a smart option is to seek an appraisal from professionals. By doing this, the homeowners will know the amount of equity that is in the home. At this point, the equity can be split or used for paying mutually held debts. It is possible to speak to a mortgage professional, such as Dustin Dimisa, to learn more about determining the equity in a home at the time of a divorce.
Compensation for the Departing Spouse
If during the divorce, the couple agrees to a 50/50 split, the individual who maintains ownership of the house must but out the one who is leaving. In some situations, the cash-out refinance option will provide the money necessary to compensate a person’s ex for their share of the equity. For this to work out, there are two things that must occur. The spouse remaining in the home has to qualify for the loan alone and the home has to have a certain amount of equity. If it is not possible to meet these conditions, a loan originator can help come up with other scenarios, including a home equity line of credit or a home equity loan. While this is possible, it is important to remember that an individual’s circumstances will determine the options that are available.
Taking the Ex Off the Mortgage
If someone’s name is on a mortgage, it means they are legally responsible for what is owed. If one person leaves the residents, leaving their name on a mortgage is not recommended. This is something that can have a negative impact on that person’s debt-to-income ratio and credit. It is up to the lender to remove a name from the mortgage, and this is typically done by refinancing. Remember, though, that not all mortgage lenders are created equal. An experienced lender can work through all types of scenarios and let a person know what options are available based on their credit score, equity, and income.
While handling a mortgage during or after a divorce can be complex, there are options and steps to take. Keep this in mind to ensure that the right steps are taken and there are no issues along the way.