If you’re getting a divorce and you own your home, there are some important decisions that need to be made. Will the house be kept for one spouse to inhabit? Will it be sold, and the proceeds divided? Will one spouse buy the other out? Will the spouse who stays in the home refinance the mortgage?
If you choose the last option, there are some factors to consider.
- Who should buy the other out?
Both of you should speak to a professional about your ability to qualify for your own mortgage – If you and your soon-to-be ex are equally able to qualify for a loan, there’s nothing to consider here. However, one of you may be in a better position than the other to qualify for a loan. Borrowers who can verify their income (and who have good credit) will get a better rate than borrowers who can’t.
- Is your income “verifiable”?
Child support and alimony can be used as verifiable income. However, if you’re recently self-employed or in a cash business, this kind of income usually can’t be verified. If you or your ex is unable to qualify (or able to qualify, but only under the conditions of a significantly higher rate), this should be part of your negotiations. If there’s a huge difference in what you can qualify for, you might decide to divide your assets another way – or to simply sell the home and split the proceeds. In any case, it’s crucial for you to get accurate information about the cost (and type) of loans that would be available to either of you before you can agree to a buy-out.
- Do you have good credit?
Divorce can be fraught with raw emotions and sometimes arguments about who is paying what bill. However refusing to pay a joint bill, when you’re going through this emotional time, could make it very difficult for you to qualify for mortgage financing. It’s best to make sure that your bills are paid, no matter who is right or wrong. Keep your credit score intact – and keep all of your receipts just in case! This way you can seek reimbursement for the expenses your ex may have been responsible for during the settlement phase, that you paid instead.
The next thing you can do to protect your credit is to separate your joint accounts as soon as possible, and check your credit score to make sure nothing was missed. A missed payment on a joint account will hurt both of your credit ratings equally. Also, if your account has been in your spouse’s name with yourself as a secondary on the account, get your own accounts immediately. You need an established credit history in order to get approved for a mortgage in your own name.
In this kind of situation, it’s important to seek out a mortgage professional who is sensitive to what you’re going through, and who can help you with what needs to be accomplished. During this emotionally (and financially) difficult time, accurate and reliable information is a necessity so that you can get a good rate and successfully buy out your ex.
*It’s recommended that you don’t make any final decisions related to your divorce without the advice of a lawyer.