With the economy being what it is… I guess more people are considering divorce. I haven’t seen a “headline” about it, but we’re certainly getting calls! If you’re in that boat, my heart goes out to you… and I have some things you should be considering.
Normally, folks refinance their home to get a better rate, or to go from an adjustable rate mortgage to a fixed rate… or to renovate their home. If you’re considering a divorce, I guess you would fall into the “renovation” part! There are definitely some points folks need to know about Refinancing your home as part of a Divorce.
As part of this “Divorce Project” you have to decide if it makes more sense to sell the home and start over – or refinance and get the other person off the mortgage. It critical that you pay attention to this… quick claim deeds do NOT relieve both parties from the NOTE (the obligation) on the home.
(** Quick Claim is not the “correct” term for this – it’s really QUIT CLAIM – this is just what a ton of people in NC refer to this process as)
If you’re the one “leaving” the property – you do NOT want to leave this to chance (I’m not an attorney – this is just my humble opinion). We’ve talked to many people (one sweet lady this week), who have a spouse that Quick Claim’s them off of a property… that’s great… but it doesn’t mean you’ll qualify for a new home, because you are STILL OBLIGATED ON THE NOTE.
What if the “schmuk” you’re leaving doesn’t make the payments? Yep, they’re going to coming looking for you and your credit report. Okay, so I’ve said enough about this.
But – we’ve seen a recent situation here in North Carolina where both parties were suppose to make 1/2 of the payment on the house directly into an attorney’s account. The Attorney would then make the payment each month, and forward to the Bank. When one of the parties stopped making payment – the attorney did not feel obligated to let the person putting in their money every month of the issue – and the home was foreclosed against…
If you’re the one here in North Carolina remaining in the house, and you’re trying to determine if you guys should sell or refinance, draw equity out and get the other person completely off the loan (I’m hoping that makes sense), then consider these steps…
Do A Pre-settlement analysis:
BEFORE you really do anything drastic – you should take a hard look at your credit… is your score over 700? Just like you need to know how medical insurance is going to work if you’re divorced – you need to take a good long look at your credit file.
If the person who is going to “keep” the mortgage doesn’t have a middle credit score of at least 700, a cash out refinance might not be feasible. You might be able to do it – but your rate might not be the best. Call us, and we can take a peak at your score. Also – do you know what your home is worth? Get an “educated,” professional opinion, don’t rely on Zillow. (again, this is just my advice). An appraisal will cost you $350 or so, depending on how big the Mc-Mansion is. Or, you could get an opinion from a Real Estate Agent.
Understanding your Equity position will help you make a solid decision. Logically – is it better to just sell this one, and buy another house – there are options for Single Parents buying a house!
Money for the Refinance:
UPDATE: New Freddie Mac Program for Cash Out Refinancing when you’re getting your Spouse off the mortgage!
Okay – so assuming you have a good credit score (Hat Tip! Congrats! You’ve got that goin’ for you!) let’s look at the “finances” of removing a spouse’s responsibility from the mortgage note, and divide equity in the home during settlement.
- It’s going to cost you at least $2000 to refinance. Now, if you have a $2000 mortgage payment, you might look at it like I do. You see, when you refinance you skip a mortgage payment – so I figure it kinda’ washes out.
- With the money you are going to take out – how much is your new payment going to be??
This is the real issue. Is that a payment, once you add the insurance and taxes that you can afford? - If you are relying on child support or alimony or maintenance to make that payment, you’re facing another challenge. Qualifying. That income might not be considered in qualifying you – so call us let’s go over your specific situation.
Every employment and qualification scenario has its own wrinkles and special considerations, especially if you are trying to qualify for Single Parent Mortgage Loans. Call Steve and Eleanor Thorne about employment to qualify for a mortgage, and your particular situation at 919 649 5058. Remember – you might qualify for a Single Parent Grant to purchase a home in NC!
If there’s anything we can do to help answer specific questions you have about Refinancing your home as part of a Divorce or how to buy a house after a divorce in North Carolina or Virginia, please call Steve and Eleanor Thorne, 919-649-5058 – or leave us a comment below. I do my best to answer all questions 🙂
And one more thing… keep your chin up… as my friend told me recently, “If He brought you TO IT, He‘ll bring you THROUGH IT!” 8o)
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Thank you for your help!