equipping you, your finances and marital home for the best possible outcome before, during and after divorce.
The Lindley Team at Mortgage Express | 503.517.8641
Deciding to purchase a home after the divorce is final can seem like climbing a mountain to some. The art of putting emotion aside and looking at buying a new property from a financial perspective is imperative to making smart decisions.
First and foremost, a home is a place to live. Over time, home ownership has also proven to be the single largest contributor to building wealth. One has to be prepared to make the payments that they sign up for as things like appreciation aren’t realized until the property is sold in the future. However, other benefits such as tax deductions, and of course, the fact that you’re paying your own mortgage rather than your landlord’s is the greatest benefit of all.
Factors as follows: Mortgage interest at 4.5%, loan to value of 80%, rent is calculated at 6% of value, real estate taxes at 2% of value, maintenance is .5% of value, insurance is $2.90 per $1,000 of mortgage amount and marginal tax bracket used is 30%. “Costs” equal monthly interest expense + insurance + maintenance + property taxes. Net Monthly benefit = appreciation + shelter value/rent saved + tax savings—costs.
Perusing the chart above evidences the value of owning real estate over time and clearly, getting paid to own vs. paying rent is the clear winner at the end of the day.
When advising divorcing clients on their housing options post-divorce, it’s important to understand the long term financial benefits as well. With so many options available combined with the financial and tax benefits when comparing the options of renting vs. owning, a complete mortgage perspective is required.\
Are you or someone you know going through a divorce where real estate or mortgage is involved? We are the only Certified Divorce Lending Professionals in Portland. Contact us today for a no-obligation consultation: 503.517.8641 or firstname.lastname@example.org
The Lindley Team at Mortgage Express - 503.517.8641 (click to call)
How you handle joint marital debt during the divorce can affect the ability to obtain future mortgage financing.
Contingent liabilities are debts that a court orders one party the responsibility of paying yet does not relinquish the legal obligation of paying the liability to the creditor. In a divorce situation, often times a mortgage cannot be refinanced and the marital home is not being sold. When the final divorce decree states that one party shall be responsible for making the mortgage payment, it is considered a court-ordered contingent liability that can be looked at in various ways when the non-responsible party is looking to obtain new mortgage financing.
Fannie Mae: As long as the final documents state who the responsible party shall be in the orders, the contingent liability will not be considered in the other party’s debt to income ratio.
Freddie Mac: As long as the non-responsible party has been removed from title/ownership, the contingent liability will not be considered in the debt to income ratio.
FHA: As long as it can be documented that the responsible party has made twelve (12) consecutive payments after the orders, the contingent liability will not be considered in the debt to income ratio for the other party.
However, there is another mortgage guideline that may throw a glitch into this mortgage planning.
What happens to the contingent liability when there has been a property settlement buyout other than refinancing the other spouse off of the current mortgage? Fannie Mae Guidelines state that “When a borrower’s interest in a property is bought out by another co-owner of the property, as often happens in a divorce settlement, but the lienholder/lender does not release the borrower from liability under the mortgage, the borrower has a contingent liability. If the lender obtains documentation to confirm the transfer of title to the property, this liability does not have to be considered as part of the borrower’s recurring monthly obligations.”
Occasionally, one spouse may have the cash available to buy out the other party’s ownership of the marital home. Rather than refinancing the current mortgage to avoid unnecessary fees or higher interest rates, the spouses may agree to leave the current mortgage in place.
However, some spouses will not agree to take their name off of title because their name is still on the current mortgage. Keep in mind that if the equity is bought out in cash or some other form, the vacating spouse may need to come off of title to qualify for future mortgage financing.
It is always important to work with an experienced mortgage professional who specializes in working with divorcing clients. A Certified Divorce Lending Professional (CDLP) can help answer questions and provide excellent advice.
Are you or someone you know going through a divorce where property or mortgage is involved? Contact us today for a no-obligation consultation. 503.517.8641 or email@example.com.
Asset Depletion is a great option for divorcing clients who need to show additional information for mortgage qualifying purposes. (It’s funny how the term ‘Asset Depletion’ is exactly what the divorcing client is trying to avoid by obtaining a mortgage in the first place!)
Various investors have varying guidelines and requirements for asset depletion; however, typically assets may be used as income with the following guidelines.
Let’s look at the ability for John to purchase a new home after his divorce is final. Due to the fact that John has to pay Jane 50% of his gross income each month, he no longer qualifies for a new mortgage. However, John has an investment account with $500,000 in it. John may qualify for the new mortgage by amortizing the $500,000 over 36 months per investor guidelines – this gives Jim an additional $13,889 of monthly income for mortgage qualification purposes and does not typically require that John pledge these assets for security purposes either.
To better explore your options for obtaining a mortgage when going through a divorce, always work with a Certified Divorce Lending Professional (CDLP). The Tammi Lindley team is the only Certified Divorce Lending Professional team in Portland.
Contact us today at: 503.517.8641 or firstname.lastname@example.org.
It’s not a fun process for anyone but unfortunately, divorce happens and when there’s a home involved, achieving property title and equity division demands expert analysis and process. Handing over the keys, payment responsibilities and even deeded rights does nothing to absolve one of their obligations to a lender.
If one party is relinquishing their ownership, they should also be released from any liability. Release from financing is a process that can only be achieved by modification, refinance, payoff or sale. In today’s world, break-ups do occur with high frequency and having access to the
necessary experience in helping your clients navigate the process as it relates to their mortgage loans is imperative.
One of the commonly misunderstood aspects of refinancing into a new mortgage is setting up the new escrow account and the costs involved in doing so. This is literally an aspect of mortgage financing where timing is everything.
The amount of funds required to establish a new escrow account is
dependent upon the timing of when current and future property taxes and homeowners insurance are due and payable. As you can imagine this can require a significant amount to be added to the new mortgage or require additional cash to close.
Additionally, in divorce situations, many clients are not aware of how future reimbursements of existing escrow accounts are handled when paying off or refinancing an existing jointly held mortgage. Any time a jointly held mortgage is paid off, whether through a sale or refinance of the marital home, the current lender will send a joint check made payable to both parties on the existing loan for any refunds on overpayment and escrow balances.
It is very important that we inform our divorcing clients of how overpayments will be handled to avoid any additional future conflict as to which party should receive the funds because both parties will need to endorse the check.
Are you or someone you know going through divorce? Reach out to us sooner than later! The Lindley Team are the only Portland Mortgage Lenders that are also Certified Divorce Lending Professionals. Contact us at: 503-517-8641 or email@example.com
Many divorced couples run into financial problems a few months after a divorce when an ex-spouse starts making late payments on a shared account. These late payments appear on both of the account holders’ credit reports, despite divorce decrees. Once the records appear on your credit report, it will show a negative status for those accounts that were not paid on time or simply, not paid at all.
In order to avoid these issues, divorced couples should close or refinance all shared accounts if at all possible. Any shared credit cards, loans and mortgages will continue to be a joint responsibility until you work directly with the financial institution to resolve the issue.
Not only can divorce lead to emotional strain, it can also cause all sorts of financial problems. All those shared accounts and co-signed loans that once seemed so romantic are now the cause of major issue. The following important tips can help avoid financial damages that will show up on your credit report and stay on your report there for years to come.
Managing Shared Accounts--It is not always possible to close or refinance all your shared debts after a divorce. Mortgages and large loans can be difficult to refinance quickly. In this situation, it is important that you and your ex work together closely to manage a shared account. Remember, your credit will be damaged if your ex cannot manage the shared account responsibly, and vice versa.
One of the easiest ways to manage a shared debt with an ex is by setting up an online account. This way, you can both easily login to check on the payment status of the loan. If you see that the debt has not yet been paid for the month, you can contact your ex or decide to pay the bill yourself in order to avoid a late payment and damage to your credit score. Encourage your ex to sign up for automatic payments that will deduct the bill from his or her
accounts each month.
An ex with bad credit may decide to ruin his or her former spouse’s credit by not paying a shared account. Keep in mind that negative reporting, such as charge-offs, liens, judgments, bankruptcy filings, foreclosures and repossessions related to shared accounts can also appear on both account holders’ credit reports. It is advisable to continue working with your ex to manage your shared finances after a divorce when at all possible.
Recently divorced borrowers can build their independent credit history by opening up new credit card account. In order to do this you have to have your credit report in good shape and some decent credit scores. Using a credit account responsibly each month has a positive impact on your credit scores and will give you a few extra points towards your scores each month.
Protecting Your Identity--It is a sad truth, but many couples go through messy divorces that leave both parties as bitter enemies in the end. When this is the case, it is important to consider the potential damage that a disgruntled spouse could do to your credit. Armed with your Social Security number, birth date, and other financial details, an ex could potentially steal your identity and cause significant damage to your credit.
After a contentious divorce, you should take a few steps to guard against any possible identity theft crimes before anything can happen. Sign up for credit monitoring that immediately alerts you to changes in your credit data. Be on the lookout for suspicious mail and signs that new accounts have been opened in your name. Change your online banking passwords and request that your account numbers are changed. If you suspect identity theft, contact the credit bureaus immediately and place a 90-day fraud alert on your credit reports.
Most importantly, simply be aware of the possible risk for identity theft. According to a 2013 identity theft survey by the Better Business Bureau, 50% of identity thieves turned out to be relatives, close friends, and neighbors of the victim. Denying that an ex-spouse could steal your identity may cause you to miss important early signs of fraud.
It is always important to work with an experience mortgage professional who specializes in working with divorcing clients. A Certified Divorce Lending Professional (CDLP) can help answer questions and provide excellent advice. The Tammi Lindley team is the only Certified Divorce Lending Professional team in Portland.
Contact us today at: 503.517.8641 or firstname.lastname@example.org.
Not a commitment to lock or lend. Terms and restrictions apply. Not all applicants will qualify. Mortgage Express, LLC. NMLS Company ID: 40831 | www.mtgxps.com | Licensed in OR/WA/CA. Licensing in CA by the Department of Business Oversight under the Residential Mortgage Act. Mortgage Express is an Equal Housing Lender. Questions and concerns may be directed to email@example.com, or 10260 SW Greenburg Road, Ste. 830, Portland, OR 97223.