Divorce Home Loan Options and Considerations

Navigating the difficult process of a divorce involves many tough decisions for both parties.  Please keep in mind that I am not an Attorney and am not providing legal advice, just considerations and some facts about Home Loans and Divorce to consider. 

Will either party keep the house?  This is a difficult decision for sure.  Will the house payment be affordable on one salary?  Are there good memories associated with the house or is it time for a fresh perspective?  The best route is to take a good, hard look at the finances, is it affordable?  Will the house meet your needs as a 1 adult home?  Will your kids benefit from staying in the same house, neighborhood, schools, etc?  Can I afford to keep the home on one salary?  Will you bring bring in room mates to help cover the monthly payment?  

Many considerations to be made and they are very personal to your preferences and finances.  We discuss the answers to these questions below. 

How will the equity be split?  (if at all)?  Was the home purchased by both spouses?  Was it financed by both parties?  Was Title held by both?  Do you live in a community property state?   Was the home owned by one party prior to marriage?  Did 1 or both parties pay all or a portion of the monthly mortgage, taxes, insurance, utilities and house maintenance?   This is definitely a subject to consider with your Attorney if it was not purchased while married and financed in both names.  

How can I keep the house and pay out my soon to be Ex-spouse?  Yes or maybe.  This will depend on qualifying for a refinance to pull out the necessary funds to equalize the payout to both parties.  This can be achieved with a first mortgage refinance or adding a 2nd mortgage.  Give us a ring and we will help you compare the options to see which is the most affordable for you. 

How do we determine the value of the home?  If you can agree on the value, that is the best route, as it avoids costly divorce attorney fees while they lob high and low offers back and forth, not appeasing either party.  Options can include using an Appraiser to value the home. A divorce appraisal differs from a home purchase or refinance appraisal as these two are used to determine the value of the home today vs a Divorce appraisal may be used to determine what the home was worth when one party left the home or separation began. You can also rely on the court to determine the final value in many jurisdictions, but it is still less stressful and costly to negotiate a fair value without bring the court into the process

If I refinance to buy out my soon to be Ex-spouse is it considered a Cash Out Refinance?  You may qualify to refinance and buy out your soon to be Ex-spouses equity without it being considered a Cash Out Refinance.  This is beneficial in several ways.  Cash Out refinances have higher rates than rate/term refinances.  The spouse buyout also offers higher Loan to Value ratios than the 80% cap on Cash out refinances.  It is also quicker than selling the home and avoids Realtor Selling commissions and closing costs, which can range from 5-8% of the sale price. .

Can I buy another home after we sell this house?  This is a good reason to consult with a trusted Loan pro.  Downsizing into a condo may sound like a budget saver, but HOA dues and Property Taxes may cut into the savings. (for California properties where Property taxes are reset when the home sells, then only minor increases from there).   Sometimes both parties end up purchasing new homes after the sale of the marital home, sometimes one party keeps the home, and sometimes both end up renting after the split. 

Consult with us to find out what your options are.   Give Brian Skaar a call at 760-752-4480 for a free consultation.