A divorce is an extremely emotional process that affects all aspects of your life moving forward. You must make a variety of difficult decisions including those that revolve around your living situation. A common debate between couples is what happens to the house after they get divorced? Who will get to keep it? Are you going to put it up for sale on the housing market? Before you get into a heated debate about it, think about what you can financially afford to do first. This may seem like an easy question, but it all comes down to a bunch of factors you must consider when getting a mortgage for a house after a separation or divorce. Just because it might seem overwhelming financially at first, that doesn’t mean it’s not possible for you to afford to keep it in reality. And, while a house has lots of memories between each wall, don’t allow it to financially destroy you in the long run. Consulting an experienced mortgage broker before making these kinds of decisions is a smart idea because a mortgage broker deals with these kinds of situations all the time. They can also offer you more options than the banks do when it comes to your mortgage.
But first, what happens to the house when you get a divorce?
You and your partner must settle on an agreement. If your spouse agrees that you can have the house, that doesn’t mean you sign it off and walk off with the house to yourself. Both partners have an equal right to stay unless you have a court order specifying otherwise. Normally when you have been legally married, each partner must pay for the house 50/50. That means you would have to buy out your partner at market value to officially call it your own. To do this you must review how much the house is worth, how much equity you and your spouse have put into the house, and how much is left to be paid off the existing mortgage. To avoid appraisal fees, you can also look to a realtor for a letter of professional opinion to decide on what the home is actually worth, though your lender will likely still want to do an appraisal of their own when it comes to firming up your new mortgage. The amount you and your partner agree on is then outlined in your separation agreement and your lawyers facilitate the exchange of money in combination with all the other assets your family lawyer will advise you on.
In today’s hot real estate market though, it may make more financial sense to sell your house and purchase one that is cheaper and better suited to your needs. Take a look at the housing market to see how much your house would be worth in today’s market, and compare it to when you first purchased your home. You may be able to make some money and have a fresh start in a new house at the same time. It might also help alleviate unwanted arguments about keeping the house during the settlement process and what the value of the home is. When you sell the house, you know exactly how much the home is worth in the grand scheme of things and the profit would then simply get divided equally between each spouse.
It’s important to ask yourself: Are you financially capable of carrying the mortgage of your current home by yourself?
A lender will need to verify that you will be able to afford the house on your own before they approve you for the mortgage you need. They may ask for the separation agreement, the amount of any child support payments, spousal support payments, and any other regular paperwork that they normally ask with a mortgage pre-approval. If you don’t qualify on your own, you could ask someone to co-sign or obtain a guarantor.
Review your current and future income before you make any final decision
It’s not just the mortgage you must factor into your monthly costs. It’s your daily costs of living including heat, hydro, water, etc. You won’t have another person paying the other end of the bills so you must be able to afford that on your own in addition to the mortgage. Creating a monthly allowance or budget for yourself before you agree to keep the house can help you realistically outline how buying out your spouse will actually look in dollars and cents long-term. Examine your finances closely and see how much money you will be spending per month. This includes everything from phone bills, to your mortgage payments and don’t forget to add a little extra for incidentals that might pop up.
Keep your credit score in check and continue to pay off those loans!
If you have a joint bill with your ex, make sure you’re continuing to pay your bills. It doesn’t matter if you believe you shouldn’t have to pay for their expensive car that you bought together. It’s important to keep your credit score in line so you can get pre-approved for a mortgage and other loans in the future. Don’t let a petty argument stop you from paying your bills. And, keep all of your receipts because you may be able to get reimbursed for the expenses that your ex was responsible for when everything is said and done in your divorce.
It’s also very important to separate your joint bills and accounts as soon as possible so you don’t run into financial issues if they stop paying their portion of the deal. If your name is on the bill or account, it will affect your credit score rating. It’s a good idea to have your own account to prove to your lender that you’re capable of paying off your debt by yourself to get the approval you need for a mortgage on your own.
Work with a trusted mortgage broker to help you get pre-approved for a mortgage
Whatever you decide to do with your home after your divorce, you will have to get pre-approved for a mortgage whether you keep the home or start hunting for a new one. Working with a trusted mortgage broker, like myself, can help you get all your documents in check, and I can show you your options when it comes to buying out your spouse or various strategies you can use financially to afford your mortgage payments without becoming mortgage broke. With my added experience as a financial adviser, I can help ensure that you are making the right financial decisions after your divorce while getting you approved for the mortgage you need. Getting a divorce is emotionally and financially difficult, so you need accurate and reliable information when finding a mortgage that works best for you. Contact me, Darren Robinson, today at 705-315-0516 or click here to set up a virtual meeting to evaluate your options, and together we will make a plan for your fresh start, in your own home.