What is Divorce Mortgage Planning?
Going through a divorce is complicated. After you or a partner file for divorce, there are many legal and financial hurdles to overcome. Divorce mortgage planning is a holistic financial approach to managing a divorce. A loan officer can help incorporate a mortgage into your short-term and long-term financial goals to help you live your life after a divorce.
The Stages of Divorce Mortgage Planning
There are four main stages of divorce mortgage planning:
- Vetting
- Qualifying income
- Consumer debt evaluation
- Home equity solutions
Vetting a house means a comprehensive examination of ownership. Vetting is the first stage of the process, and it is one of the most important. Vetting carefully evaluates your house and real property to determine if it is marital or non-marital.
Property taxes will also be analyzed, along with tax status and the home’s value. An officer will also see how much equity you have available. All the fine details of the ownership and property are important for the settlement process. This first step can help you figure out what kind of mortgage financing you do or do not qualify for. The details of your real property are independent of income sources and credit scores.
Qualifying Income
Qualifying income helps with tax and financial planning. Be aware that qualifying income does not necessarily include all the income you generate each month. Only specific sources of income that count as monthly income can count as qualifying income. For instance, if a former spouse is receiving spousal or child support, they may not meet the requirements for an ongoing monthly income that is mandatory for mortgage financing. Additionally, a spouse in the divorce may have just returned to work, and that spouse must meet back-to-work requirements to qualify for mortgage financing. Many people think that their total income counts as qualifying income. Still, only a professional can tell you which sources of income can or cannot count towards your qualifying income.
Consumer Debt Evaluation
Consumer debt evaluation (or analysis) can also help in a divorce process if mortgage financing is required. Consumer debt analysis considers how the individual or marital debt is assigned. The end goal is to put the divorcing spouses in a position to have better financing terms on their mortgages. For instance, a borrowing spouse may still be obligated to make payments on the mortgage for a marital home or pay money on another debt that was assigned to their former spouse. Any remaining debt should be considered in the debt obligations of the borrowing spouse. Shared credit card counts are another consideration. If two spouses previously shared a combined credit card account, they will have to close those accounts and open new accounts individually. Closing a credit card account and opening a new one right away can negatively impact one’s credit score, which is a consideration to consider as you are going through divorce proceedings.
Home Equity Solutions
Home equity solutions can help homeowners going through a divorce with some of the financial aspects of the divorce. A lender’s home equity solutions can help homeowners who are divorcing make the best decisions for themselves regarding mortgage financing and home equity solutions while the divorce is ongoing and after the divorce is complete. For instance, if a borrowing spouse must complete an equity buy-out to obtain the other spouse’s equity ownership, the lender will work with the spouse to obtain the best mortgage options and use the mortgage for financial planning and stability. The borrowing spouse may have several options, including a reverse mortgage, debt consolidation, or a ROTH IRA conversion.
What is Real Property?
Real property is one asset that will be evaluated during divorce mortgage planning. Real property is fixed land, and it can refer to the land that a person owns and the structures on the land. In addition to the house, garage, and other common features, it can also refer to dams, wells, machinery, crops, and other buildings such as barns. Real property differs from personal property, which is also an important consideration during a divorce. Still, it is less relevant for some of the financial aspects of navigating through the end of a marriage. The person who owns the real property has the rights to the property’s ownership. Real estate is also different from real property, so if you want to learn more about the difference between the two and how it relates to your mortgage during a divorce, contact a professional or your divorce team for more information.
Managing Divorce Finances
The process can be long and arduous, even if a divorce is amicable. There are some key considerations to keep in mind as you go through a divorce when it comes to managing your finances. You’ll want to consider whether you and a spouse signed a prenuptial agreement before tying the knot, which can provide quite a bit of power when trying to figure out how to distribute marital assets. Usually, this arrangement ends with you and the divorcing spouse keeping their marital assets.
In addition to opening a new separate credit card account, you should do the same with a bank account. The new account should be the one that you use for your own personal expenses and future deposits. Any old account you share with a partner will have to be split evenly between the two spouses. When dealing with finances related to your divorce, you will need to understand your accounting and financial situation clearly. You’ll need to gather all your recent financial documents, such as bills, mortgage payment statements, credit card statements, bank statements, debt, and income streams. Any pension contributions and life insurance policies should also be considered. The information in all these documents will help you figure out how much money you have flowing into and leaving your bank account each month.
Work With a Divorce Team
A divorce team will work with spouses who are going through a divorce. A divorce team can include one or more of the following professionals: an attorney, mediator, real estate professional, financial advisor, and divorce mortgage planner. While you don’t have to have all these individuals on your divorce team, it’s a good idea to work with at least one or two trusted individuals to help you make the best decisions in cases where you are unsure of what to do.
What is a Certified Divorce Lending Professional (CDLP)?
A Certified Divorce Lending Professional (CDLP) will work with members of the divorce team to ensure that the divorcing spouse’s best financial interests are in mind and that the spouse is making the right decisions to continue on with life financially after the divorce becomes official.
Finding the right CDLP is imperative to make sure that the divorce is as smooth and successful for both parties as possible. The CDLP is one member of the divorce team that you’ll put together. The CDLP has a background knowledge of financial and tax planning, family law, real property, and mortgage financing.
For more information, don’t hesitate to contact a knowledgeable CDLP for questions and assistance as you are navigating a difficult time in your life.
