The Art of Refinancing During a Divorce
Latrice Knighton is an award-winning divorce attorney, life coach, and speaker. She solves problems using her experience and legal knowledge to offer practical advice.
Whether you decide to keep or sell the marital home when going through a divorce, you are going to have to go through the proper steps to ensure that everything is handled to tend to both parties' wishes.
Many do not know where to start when it comes to this scenario, nor do they know what options they have moving forward. In these cases, it is best to consult with a professional in this field so you can be made fully aware where you stand and what your next steps can be.
Typically, one party will try to keep the home and the other party will wish to be bought out of their half. In order for both individuals to get what they want, they will need to work together with a professional in the lending field in order to make sure that all parties are getting what is fair.
Today, I interviewed Joshua Bucio from Waterstone Mortgage about how we can best prepare you to handle this situation.
You can look at your mortgage statement first since that will usually have all parties listed. If not, look at some of your docs from the closing, particularly at the note and closing disclosure documents, as those may indicate all who are supposed to be on the mortgage.
What else can a mortgage statement tell us?
It can indicate the current balance owed on the home, the payment information and a breakdown of what is included in the payments, closing dates which can sometimes be important in the family law realm, and other information that might affect refinancing. Always bring this statement with you when reaching out to a professional for assistance.
What are some factors that come into play when refinancing a home?
There are several different factors that are considered, including the debt to income ratio, your current credit, and any assets that you may have. All of these factors will give the lender an idea of what you can afford and what your best options given your specific situation are.
How can one determine the current value of the home?
You would need to get in touch with mortgage professional first about the refinancing process. From there, the company will order an Appraisal Report from the management company they work with, and the management company will outsource the order to a local and licensed appraiser for an unbiased opinion of the value. Some wonder if they can use a city assessor's appraisal, but they cannot since those appraisal's are strictly for tax purposes.
Can't I just take the total cost of the home and adjust based on the time and additions made?
No, because the value of your home also depends on your neighborhood and other factors that may have changed over time. Also, only certain additions will add value to the home and not all of them are a dollar for dollar trade-off, so you need to make sure the features you are adding will actual increase your home's worth.
Can you use the appraisal from the courts during the divorce when attempting to refinance?
Unfortunately, no you cannot. The company lending the money must be the one to request the appraisal. This is just part of the process and is something the lender must follow.
What happens if you try to refinance a home while you have a mortgage and a HELOC?
The lender can pay off both the mortgage and the HELOC or just the mortgage if you are looking to keep your line of credit. Most times, both will need to be bought out if someone is looking to get their name removed from the mortgage.
How soon does the person being bought out receive their check?
It will take about 4 days for checks to be cut for the home. This is typical since there is a state mandated 3 day hold for the right of recision in case the sellers have a change of mind.
Can clients call you about potential options and what knowledge can they get from that first conversation?
I encourage everyone to come sooner rather than later to get their questions answered and to determine the possibilities. We can get started on your prequalifications early so that you have an idea of what your goals should be and take stock of your current situation.
How can a cosigner help the refinancing process?
A cosigner can help in situations where the debt to income ratio is too high or when other standards are not up to par for you to meet certain payments. In these situations, it is a good idea to find a cosigner who can help bring those payments down until a point in time when you can refinance the home again to remove them from the mortgage.
How can clients contact you?
1133 Quail Court Suite 200
Pewaukee, WI 53072