They say there are 3 necessities in life: food, shelter and clothing. Food and clothing are pretty much a given but when going through a divorce determining where you are going to live and how much that will cost can be very stressful. One of the first discussions in the divorce process should be around this. Quite often once this is agreed upon other portions of the settlement agreement can fall together more smoothly.
One of my first questions when working with divorcing clients is to ask if there is a home (s) involved and the interest level of the one of the parties hanging on to it.
Next does the home need to be refinanced to release the non-occupying party of the liability (just because a court signed settlement agreement awards one party the home and states they are liable for the mortgage it does not release the other party from the legal mortgage contract). From there we can discuss how much equity is in the home and if that must be split. If split, can we take it from the home during the refinance or does it need to come from another source of savings.
At this point we can look at different loan scenarios (straight refinance vs different cash out options) to determine what the payments will look like and if the party staying in the home can qualify for that amount and/ or are they comfortable with that payment. We can also compare this to other alternatives such as buying a different home or renting. It also helps the party who is not staying in the home to determine if they can buy another home and what the qualification parameters will be so they can have those addressed in the settlement agreement and have a comfort level with their housing options. If there are children involved, having a plan and being able to let them know where they will be living can also be very beneficial.
Another big factor is with each party now knowing what there housing expenses will be you can now determine what the amount of possible support needs to be.
If there are other assets involved in the divorce and you know how much of the equity from the home is going to each party, you can then start to determine how other assets can be split.
Having a strong understanding of your housing options can help bring down the stress level.
The above is a light overview and the loan officer at the bank/ credit union/ broker office doesn’t fully understand legal divorce requirements vs mortgage guidelines and I have seen them give very erroneous information. As a top producing Licensed Mortgage Planner for 29 years specializing in working with divorcing clients I would be happy to help answer your questions and put a plan in place. Quite often that plan may take some revisions which is Ok as we will have that built into your paraments. I will do everything I can to help you feel confident in your housing options.
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Articles and resources from Bill Wolfe on collaborative divorce, mediation, and family law in Sacramento.