When a couple decides to part ways, they will have to go through one of the most emotional times of their life. Not just that they will be parting with there once thought soul mate, but now they have to figure out how to live on a single income, where they are going to live, how to preserve their credit and how to restructure their financial future.
It is best to start with the largest asset, which is normally their home and is the foundation of their finances. Now there are several questions that must be addressed concerning the house. Such as:
- Should you sell or refinance
- What is the appraised value of the house
- Who will stay with the home and how the other spouse will be compensated for their portion of the equity.
All these questions can only be answered on a case by case basis as no 2 divorce cases are exactly the same.
If there is no mortgage on the home, then it’s a matter of having a quit claim deed drawn up by your attorney to transfer title to the spouse keeping the home. From there the spouse that is keeping the home will either need to do a Equity Loan, Line of credit or a refinance. The equity loan or line of credit will be the most cost effective as a lot of them have little or no closing cost involved. The purpose of this loan is to compensate the other spouse for their portion of the accumulated equity in the property.
Now one quick note that is important to understand, if there is a mortgage on the home and both spouses are responsible for the monthly payments of the mortgage, then this mortgage must be paid off either thru a refinance or a sale.
In Fort Lauderdale, a quit claim deed will only transfer title, it will not release the non occupying spouse from the obligation of the mortgage. The only way to do this will be to pay off the existing mortgage, normally through a refinance.
Now one of the most common mistakes in Fort Lauderdale is the non occupying spouse agrees for the spouse staying in the home to refinance after the divorce is complete.
Big NO NO……this needs to accomplished ASAP before the divorce proceedings is complete. Doing this is the early part of divorce will reveal some very important factors such as whether or not the occupying spouse can qualify for a loan on their own to release the non occupying spouse from the mortgage obligation, if not they the best bet may be just to sell the house. Or if the occupying spouse really wants to keep the property then the help of a qualified mortgage expert can help structure this, such as adding a family member to the loan the assist the occupying spouse with qualifying for the loan.
If the divorce process is complete and the occupying spouse cannot qualify, then the non occupying spouse will still have the debt obligation and if the occupying spouse makes any payments late or worst goes into foreclosure this will affect the non occupying spouse’s credit adversely. This could affect the non occupying spouse ability to qualify for a new mortgage for buying a new home.
A common problem in today’s Fort Lauderdale market is declining values. Couples thinking of divorce in Fort Lauderdale are finding themselves with a home that is upside down in value and no one wants the house. One solution to this is to let the judge make the decision or if you are willing to take a credit blemish then a Short Sale can be a solution to selling a property that is upside down.
