“Removing the Ex-Spouse from the Mortgage”
“REMOVING THE EX-SPOUSE FROM THE MORTGAGE”
A very common problem in concluding a divorce matter is following up on an agreement where one spouse is to “buy out” the other spouse’s interest in the former marital residence. If an agreement as to the amount of payment can be reached, then the spouse receiving the funds can easily process a Quit Claim Deed in exchange for their interest. In most situations, however, both former spouses remain on the mortgage loan and are subject to that debt until a refinancing can occur. This frequently causes some difficulty, especially when part of the settlement is coming from a refinance of the home. The loan would be much higher while at the same time much harder to qualify for, for the ex-spouse to receive the home.
There are a number of ways to attempt to solve this problem:
• The party seeking to retain the residence and do a refinance should obtain a co-signer with strong credit or income to act as co-borrower. Some lenders may also require this co-borrower to sign on the title. Typically, a close family member is an appropriate choice for this type of assistance.
• Some parties elect to keep the loan as it is. In a less contentious case, both parties may agree to stay on the loan in order to ensure that the party keeping the property, which may include the home for the children, have a preferred place to live. The risk and potential negative impact of this solution is that the spouse no longer residing in the home may have difficulty keeping track of the status of the debt in the event that the party receiving the home misses payments or fails to keep the mortgage up-to-date. The second issue that the ex-spouse, no longer living in the home, may have to deal with is attempting to buy their own home while their credit is still impacted by being on the existing loan for the former home. This may hamper his or her ability to buy something for him or herself.
• An Alimony or Spousal Support Order can be helpful in obtaining financing. Generally speaking, using Spousal Support to qualify for a mortgage requires a six month history of receiving the Spousal Support and, also, that the Spousal Support Order indicates it will continue for three years from the date of the application for the loan. In other words, if Spousal Support is part of the income supporting the loan application, it would have to continue for the first three years, as a minimum. Keeping both ex-spouses on the loan for the former marital home, therefore, may be necessary until six months after Spousal Support payments commence. Along the same line, it is possible the parties can negotiate the gross amount of child support and delay implementation of monthly payments. This provides the recipient spouse an opportunity to use those funds as a possible down payment. It may be difficult to make decisions about the marital residence while going through a divorce. Sometimes it is simply not possible to keep the residence for either party. At that point, other alternatives will need to be considered.
The Divorce attorneys at Damon, Ver Merris, Boyko & Witte, PLC are experienced in assisting you and counselling you on these decisions.
For this and any other questions you may have, please do not hesitate to contact the law firm of Damon, Ver Merris, Boyko & Witte, PLC at (616) 975-9951 to speak to one of our Grand Rapids Divorce or Family Law Attorneys. We are here to help. – Curtis R. Witte / May 30, 2018
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