In the exhaustive division of assets that occurs in most divorces, the issue of the family home inevitably comes up. What should be done with it? Who should keep it? Can that individual afford to keep it? Answers to these questions and more should be considered before making any decisions.
In many cases, one spouse wants to keep the house after a divorce and buy out the other spouse’s share. This is usually desired due to stability, the best interest of the children, and/or an inability to afford comparable housing. However, many spouses fail to consider the long-term financial costs associated with keeping a home post-divorce, such as property taxes, cost of maintenance, potential decrease in the home’s value, and how paying for a home with just one income may impact retirement funds. Here are some common tips for divorcing couples who want one party to keep the marital residence.
A common solution is to refinance the loan. However, issues can arise if one spouse is attempting to secure a loan post-divorce. Since the family income has gone from two to one, funds are less. The matters get further complicated when alimony and child support are involved. Many divorcees don’t realize that the amount of alimony and child support received is not viewed by lenders as a reliable form of income until it is received for 12 months. This can greatly affect the refinance in terms of payment amounts and interest rates. If the breadwinning spouse decides to refinance, they may also be negatively affected by the divorce agreements. The amount of money paid in alimony or child support is often times subtracted from their reported total income, thus potentially resulting in less-favorable loan terms.
It is important to consider and anticipate certain challenges that may arise during the process of a spouse needing to refinance. Be sure to check title transfers. In order to remove one spouse from the home’s title, a quitclaim deed should be executed. If not properly done, the refinancing process could be significantly delayed. Before signing a divorce settlement in which one spouse must refinance, have a lender run a credit check. This will give the individuals time to negotiate changes that may increase the chances of being approved for the mortgage. The last and most crucial advice that can be given is to not go into this situation alone. In order to have a fair and doable outcome for both parties, it is important to employ a team. An attorney and a financial advisor are two people who will make sure the process runs smoothly, as well as ensure it is done correctly. These individuals can offer a reasonable view of what finances might look like post-divorce.
To make an informed decision, it is important to talk with an attorney trained to handle these kinds of complex situations. At HoganWillig, our matrimonial and real estate departments work TOGETHER under ONE ROOF to provide a full service to our clients. Letting us handle multiple aspects of your legal needs takes the stress and confusion out of the process. Call us for help today at (716) 636-7600.