Divorce and Mortgage: 10 Expert Tips to Keep Your Home and Your Sanity

Divorce is a challenging time that brings significant changes to one’s life, and it’s crucial to approach it with careful consideration, especially when it comes to financial matters. At The Richard Woodward Team Nexa Mortgage, we understand the complexities of divorce and the impact it can have on your financial well-being. That’s why we emphasize the importance of getting pre-approved for a divorce mortgage before signing the final divorce decree. In this article, we will discuss the 10 worst mistakes divorcing couples make regarding their finances and why getting pre-approved is a smart decision to make.

Mistake #1: Neglecting the Expertise of a Divorce Lending Professional

When going through a divorce, seeking the counsel and advice of a certified divorce lending professional is invaluable. A certified divorce lending professional specializes in mortgage financing and understands the unique financial challenges associated with divorce. Here’s why their expertise is crucial:

A. Specialized Knowledge: Divorce lending professionals have extensive knowledge of the mortgage industry and understand the complexities of divorce-related mortgage issues. They can provide you with personalized advice tailored to your specific situation.

B. Pre-Approval Guidance: Working with a certified divorce lending professional allows you to get pre-approved for a divorce mortgage. This step is essential because it gives you a clear understanding of your borrowing capacity, ensuring you make informed decisions during the divorce process. If you are going to buyout your ex-spouse’s marital home equity, you should never finalize your divorce without a preapproval.

I have had the unfortunate experience of receiving calls from many recently divorced clients who are desperate to refinance and buy out their equity, only to discover that they never qualified to do so independently. Now, they find themselves in the unfortunate situation of having to either go back to court for renegotiation as they are now in contempt of their divorce decree or sell their house and move into an apartment.

C. Strategic Planning: An experienced divorce lending professional can assist you in developing a strategic plan that aligns with your long-term financial goals. They consider factors like property division, spousal support, child support, and other financial obligations to help you navigate the mortgage process successfully.

D. Collaborative Approach: Experienced divorce lending professionals work closely with divorce attorneys, financial planners, and other professionals involved in the divorce process. Their collaborative approach ensures that everyone is on the same page, allowing for a smoother and more efficient resolution of mortgage-related matters.

E. Mediation Support: In cases where mediation is involved, a certified divorce lending professional can provide expert guidance during negotiations. They can help assess the financial implications of various mortgage scenarios and facilitate productive discussions between the parties involved.

F. Post-Divorce Mortgage Solutions: After the divorce is finalized, a certified divorce lending professional can assist you in securing a mortgage that suits your needs as a single individual. They can help you explore options such as refinancing, obtaining a new mortgage, or assuming an existing mortgage, depending on your circumstances.

The Richard Woodward Team of NEXA Mortgage is the nations largest mortgage broker with access to over 200 competing wholesale lenders. Our massive volume can deliver to you, our client, lower rates and fees so you win!

Mistake #2.

Not getting a copy of your credit report from all three credit bureaus – Experian, Equifax and TransUnion. It is impossible to formulate a financial plan without having a complete understanding of the situation. There may be charges, inquiries or late payments on your credit report that you are not aware of. If you need help getting a copy, please let me know. We can provide you a soft credit pull in the very beginning to see exactly what is on your credit report. Pro tip-immediately freeze all 3 of your credit bureaus.

Mistake #3.

Not establishing your own credit. Separate as many as your unsecured accounts as you can, especially your credit cards. If this can be done without closing the accounts it would be better, so that you don’t lose out on the credit history you have worked so hard to establish. Keep in mind that while you have joint accounts, even one late payment can lower your credit score by up to 50-75 points.

Mistake #4.

Not knowing what you own and/or what you owe. Make copies of all important financial documents – wills, bank accounts, stock portfolios, retirement accounts, real estate owned, titles to vehicles, life insurance policies, monies owed to you, etc. Also make copies of documents that reflect your marital lifestyle – checking statements, credit card statements, tax returns, cash receipts, etc. You may need to get a restraining order if you believe your spouse will try to liquidate any of the accounts. The court not only orders equitable distribution of marital property, but of marital liabilities and debts too. Have copies of mortgage statements, car payments, school loans, home improvement loans, credit card bills, loans payable to friends or relatives, business loans, medical bills, etc. If you will be dividing up some of these liabilities, make sure you check the interest rates so that you don’t get stuck paying the bills with the higher rates.

Mistake #5.

Not having an accurate budget or planning for the future. Review all credit card statements, utility bills, mortgage statements, checking accounts, cash withdrawals, and other financial documents so that you will have an accurate picture of what your budget may look like. Also, take into consideration future expenses – inflation, rising medical and insurance costs, loan payment increases due to rising interest rates, increased child care, increased real estate taxes, education, etc. It is critical to understand your future needs, not just what is happening today.

Mistake #6.

Not using a financial planner or tax advisor. All investments are not created equal. A $10,000.00 CD is not the same as a $10,000.00 Stock or a $10,000.00 401(k). There may be huge tax consequences involved with some investments that could greatly reduce your investment yield if not handled properly. You must be aware of the tax laws concerning alimony, child support, retirement funds, real estate property and capital gains. A tax advisor can help you see if there are any penalties that may apply, especially when dividing up retirement accounts.

Mistake #7.

Not being prepared for meetings with your attorney or other financial advisors. In order for your attorney to get the best settlement possible for you, they must have the full picture. Failing to provide all the necessary financial documents or trying to hide things from them, only prolongs the proceedings and wastes valuable time and money. Be as organized as possible so that those working on your file won’t have to “dig” for information.

Mistake #8.

Removing your name from Title too soon. Unless your name has been removed from the loan, don’t remove your name from ownership. This goes for your real estate properties as well as your vehicles. You don’t want to end up financially responsible for something you don’t even own. You can remove your name or your spouses name from a mortgage debt by refinancing or trying to get a “Qualifying Name Delete Assumption.” You or your spouse will have to qualify for the debt on your own merit. Never sign a quit claim deed if you are on the original mortgage or car loan until the debt has been refinanced or sold.

Mistake #9.

Letting your emotions rule. Having an emotional attachment to your house or your belongings can keep you from thinking clearly and prevent you from making wise or rational decisions. Be realistic about what you can or cannot afford. Although you may “love” your home, you may not be able to pay for it once you are on your own.

Mistake #10.

Not insuring your divorce settlement. The premature death or disability of the supporting spouse can result in the loss of child support, alimony, college tuition or other property settlements. Life insurance and/or Disability Insurance can insure your family’s financial future. Be sure to include this in your negotiations.

By seeking the counsel and advice of a certified divorce lending professional, you can navigate the complexities of divorce mortgage financing with confidence. Their expertise ensures that your mortgage decisions align with your long-term financial goals and help set you on a path to a secure future.

At The Richard Woodward Team Nexa Mortgage, our certified divorce lending professionals are dedicated to providing you with the support and guidance you need during this challenging time. Contact us now to schedule a consultation and discover how we can assist you in making informed mortgage decisions throughout your divorce journey.