Divorce Real Estate
Unfortunately, Orange County, California has one of the highest divorce rates in the nation. According to Certified Family Law Specialist (CFLS) Patricia Hendrickson, about 72 percent of marriages in this county end in divorce, compared with the national average of about 50 percent. That is significantly more risky than placing your marriage bets on a simple coin toss. In light of these statistics and the complex nature of divorce, the help of a knowledgeable and experienced Real Estate Divorce Specialist is essential in navigating how to handle your most valuable asset.
Divorcing the Marital Home
In most marriages, the mortgage is the largest liability the spouses have to split, but divorcing the loan payment is not so easy.
Love may not be forever and marriages end, but the mortgage for the marital home remains. Those mortgage payments are still your responsibility unless you find a way to part with it. From the lender’s perspective, you are still married and obligated to continue paying the mortgage unless you sell the house or refinance it.
The easiest way to rid the joint debt is to sell the property, pay off the mortgage, and move on to build better memories. Barring that, “refinancing the home loan under the name of one spouse can be an easy fix”, says Jordan Bennett. “The biggest question you need to pose is whether one spouse on their own can afford to keep the house and keep in mind, there are many other expenses attendant to home ownership, not just the mortgage payment”, he reminds divorcing spouses.
A mortgage refinance may be appropriate if certain conditions are met.
- The divorcing spouses are not “underwater” on the mortgage, meaning they don’t owe more than what the house is worth.
- One spouse has ample credit and income to meet the credit qualifications.
- The other spouse is ok to let go of the family home.
Jordan has seen some circumstances, however, where the husband or wife do not have enough income on their own to keep the marital home, they can’t survive the mortgage underwriting process or both. “I ask my clients a very pointed question”, Jordan says. “That is, if you were single, assuming you were never married and lived in the home at all, would you purchase this home?”.
If both spouses can’t shoulder the mortgage on their own, can’t refinance and can’t sell the marital property, you can theoretically arrive at some agreement and leave the mortgage “as is”, and try your best to make sure your ex-spouse coughs up their share of the mortgage payment each month, but Jordan strongly advises against it. “This type of informal arrangement is risky since let’s say the ex-spouse doesn’t keep up with their mortgage”, he warns. “In that case, both the husband and wife’s credit is tarnished”.
When to Sell: Before or After a Divorce?
If you are going through a divorce, when should you sell your home? It’s easy to assume that putting your home on the market as soon as possible is the better choice, but that may not be the case 100% of the time. There are benefits with either option depending on your needs and situation.
Why sell before the divorce is final?
Getting it Over With – By getting the property on the market early on, you’re maximizing the amount of time it’s available and potentially drawing in more interested buyers. If your home sells, you’ll be fully-funded to start your new life, in your separate residences, when your divorce is finalized.
Higher Tax Write-Off – When you sell as a married couple, you can exclude up to $500,000 of the home equity from the capital gains tax. If you sell your house afterwards, your maximum write-off drops down to $250,000.
Why sell after the divorce is final?
One Thing at a Time – Some couples have an especially challenging divorce experience and do not want the added stress of a real estate sale on top of that. There is so much change already happening that delaying the sale might be more suitable for both parties.
Appreciation – With home values continuing to rise, waiting to sell your home until after the separation may get you a higher purchase price, and subsequently, a higher profit split.
Is it possible to get a mortgage after the divorce?
It’s vital that the settlement and decree spell out in no uncertain terms that the spouse that continues to inhabit the family home is solely responsible for the mortgage payment. After all, if one spouse wants to apply for a loan in the future, the lender must be convinced you are absolved of this obligation. Some lenders even go so far as asking for canceled checks from your ex-spouse to prove that you are not the one making the payments.
Whatever options are best for your circumstances, this process is best approached with a neutral, experienced REALTOR like Jordan Bennett who specializes in divorce real estate. By having Jordan in your corner early on, you can avoid many hassles and problems later.