If you are divorced or are going through a divorce, you might assume that receiving alimony and/or child support payments will qualify as income to refinance your current mortgage or get a new one.

Unfortunately, you may discover that is not necessarily true.

Requirements for Alimony and/or Child Support to be Considered Qualified Income for a New Mortgage or Refinancing

The alimony and/or child support you are or will be receiving will only qualify as income if:

  1. It is subject to a Divorce Decree or a Divorce Settlement or Separation Agreement and
  2. It passes the “6/36 rule.” This rule applies separately to the alimony payments and the child support payments. You must be able to prove you have consistently received each payment separately for at least the previous 6 months and that you will continue to receive each for at least 36 more months (3 years) from the date of the closing.

In order to prove the 6/36 rule, you will have to show that payments were consistently received on time for the previous 6 consecutive months using bank account statements, deposit slips, or some other proof of receipt. You will also be required to provide the Divorce Decree, Divorce Settlement, or Separation Agreement that stipulates the amount and duration of Alimony and/or Child Support, along with evidence of your children’s ages (birth certificates) to show that they will be young enough for you to continue to receive Child Support for at least 3 more years after closing. (The age of emancipation – when child support is no longer required to be paid – is typically 18 or 21 in most states.)

If you are also receiving payments as part of your divorce under a Property Settlement Note (for your share of a business or other property), you must show evidence that you have received the payments consistently and on time for at least the previous 12 months and that you will continue to receive those payments for at least 36 more months from the closing. You could call this the “12/36 rule” for Property Settlement Note payments.

Click Here to Learn More About Child Support, Alimony, and Property Settlement Note Payments.

How We Can Help You

These are just some of the many unique aspects of refinancing your current mortgage or getting a new mortgage if you are divorcing or divorced.

Unfortunately, many divorce attorneys, loan officers, and mortgage brokers are not familiar with all the nuances of mortgage financing in the context of divorce. (There are many others and we will write about them in future articles.)

Ideally, you want to structure your Divorce Settlement Agreement in the best way possible so you will not have any obstacles when trying to refinance your current mortgage or get a new one.

Therefore, it is very important that you work with a divorce mortgage expert during the divorce process and not after your divorce is finalized when it will be very difficult, if not impossible, to make any changes. Please contact us for more information.

In divorce, it is common for one spouse to want to keep the home. This will require the other spouse to be removed from the title. More often than not, the existing mortgage will need to be refinanced into just the name of the spouse keeping the home. Your divorce lawyer can ensure you are legally protected through this process and we can guide you through this process and help you refinance your mortgage into just your name.

After you have a clear plan for the house and know you can refinance the mortgage on your own, it is important to understand that the transfer/change in title will be handled by a deed. The deed is critical to your transaction. Make sure you have a clear understanding of your options when it comes to the deed.

The deed/title and mortgage are independent of each other. Being taken off the title via a deed does not negate the obligations of the removed spouse if they are on the mortgage. The deed transfers ownership to the spouse keeping the house. The other spouse can be removed from the existing mortgage if the spouse keeping the house can successfully refinance the mortgage into just their name. This is not always possible.

There are several different kinds of deeds, with different levels of authority and protection. Once the ownership has been transferred via the deed, the person removed from the title has no legal right nor access to the property without the permission of the owner, even if they are still on the mortgage.

Transferring Ownership with a Deed

A deed is a document that is used to change the ownership of the property. When selling or gifting property, one must transfer the ownership of the property from the previous owner(s) to the new owner(s). Deeds are recorded in the county courthouse, where a history of the property’s ownership can be accessed.

A grant deed, also called a special warranty deed, offers special guarantees. It guarantees that the property has not been sold to someone else and that the house is not under any liens or restrictions that have not been disclosed to the buyer. A warranty deed is a grant deed with the added guarantee that the seller will defend the title against any third-party claim, including a previous owner.

A quitclaim deed is a quick and easy process for removing one person’s name from the title. It must be notarized and recorded at the county courthouse or it will be considered invalid. Though often used by divorcing couples, a quitclaim can be used between parties other than couples.

An interspousal deed, however, is specific to married couples. It transfers property from one spouse to another, in order to avoid property reassessment or tax liability in transferring ownership. It is not exclusively used for divorcing couples, but that is often the case.

Getting Legal Advice

A divorce and/or real estate attorney experienced in divorce real estate can help with the division of marital real estate. Divorcing couples can make mistakes that cause future problems, for example:

  • Choosing the wrong form of deed transfer
  • Transferring half the ownership, thinking they only own half the property
  • Not having the deed recorded by the appropriate county authority
  • Missing important information on the deed that would make it invalid or open up one or both spouses to future litigation

Transferring the Mortgage and the Title

Transferring ownership via the deed does not exempt a person from responsibility for paying the mortgage. This is a completely separate process. The spouse keeping the house will need to refinance the mortgage into just their name so that the other spouse who is no longer an owner of the home (by virtue of the deed transferring ownership) has no further obligation for a mortgage on a house they no longer own. The refinancing spouse must qualify for a new mortgage based upon their own income, credit score, etc.

What to do with the marital home is often one of the biggest decisions in divorce. This decision can be quite contentious since the home is often the largest marital asset. Next Act Properties specializes in real estate solutions for divorcing couples. We can help you determine the best course of action for your particular situation, such as one spouse keeps the house and refinances, the house is sold, or you consider our unique Sale/Leaseback Program.

Can you afford to keep your house? Should you sell? Downsize? These are some key questions that may be going through your mind as you try to determine what to do with the family home during a divorce. A variety of factors must be considered in order to determine what is best in your particular situation. 

If you would like to keep your current house, we can discuss how you can buy-out your spouse and refinance your mortgage into your own name. After years of working with divorcing people, we know how critical your post-divorce finances will be for your long-term financial health. We can help you make financially sound decisions and even help you save money during the process.  

Can you afford to keep your house?

A number of variables need to be considered when determining the answer to this question. First, consider all your sources of income and all your other financial obligations outside of anything associated with the house. 

Next, consider the monthly mortgage expense. Add to this all the monthly expenses associated with the home: taxes, homeowner’s insurance, HOA fees, utilities, and other items such as lawn care or snow removal. In addition to being able to afford these expenses, you will also need sufficient assets or cash flow to cover unexpected bills, such as repairs and new appliances. All these factors must be considered when determining whether or not you can afford to keep the house. 

If you keep the house, do you have the funds to buy-out your spouse? In addition, you will likely need to refinance the mortgage into your own name. There are many requirements that lenders have that you and many loan officers and mortgage brokers who don’t specialize in divorce may not be aware of, such as the stipulation that alimony and child support payments must have been consistently received for the last 6 months and must continue for at least 3 years after the date of your mortgage application or the signing of the note to be considered qualified income. If that’s not the case, you might very well be rejected for lack of sufficient income.

If you are the one paying alimony and child support, it will be considered an ongoing monthly expense that could cause your expenses to be too high in relation to your income, possibly disqualifying you for a new mortgage or refinancing.

There are many other requirements that are specific to divorce and we can help you deal with all of them through our nationwide network of mortgage brokers who are trained and experienced in working with divorcing/divorced people.

And if your home is in Florida, we can help you directly through our sister company, Next Act Mortgages, LLC (NMLS #2123503).

Should you sell? What if you still want the house?

If you determine the costs of keeping the house are too high and/or you’re unable to buy-out your spouse and refinance the mortgage, you may not have a choice but to sell to a third party or to utilize our unique Sale/Leaseback Program

If one of you really wants to keep the home and cannot afford to buy-out the other and refinance the mortgage, then our Sale/Leaseback Program might be the perfect solution for you.

When we purchase your home for cash and lease it back to you, you free up the cash you need to start your new life and pay your bills while staying in the house that you love. We provide flexible leasing terms, and you have the option to buy the home back at a later date. 

Should you want or need to sell the house, our sister company, Next Act Realty, LLC, can help you sell your house through our nationwide network of divorce real estate experts. We have done the research and have vetted a team of expert agents across the country. These agents have specialized training in the unique financial, legal, and tax aspects of selling real estate in the context of divorce and have many years of experience helping divorcing couples sell their marital homes. Contact us today to see how we can help you.

Homeowners will generally get a real estate appraisal of their property when they are ready to sell in order to determine an appropriate asking price. When selling a home during a divorce, an accurate appraisal of the current value is particularly important in order to negotiate the division of marital property. 

How a Real Estate Appraisal Works

An appraiser considers multiple factors when determining the fair market value of your property. Reputable appraisers follow the Uniform Standards of Professional Appraisal Practice (USPAP) and the Professional Code of Ethics adopted by the Appraisal Institute. These standards require appraisers to follow guidelines that establish fair, impartial, accurate, and non-biased practices to determine the value of your property. 

To determine fair market value, appraisers look at comparable properties in your area that have recently sold, throwing out any outliers that sold for a much higher or much lower price than other comparable houses. Some of the qualities considered when determining if a house is comparable include square footage, number of bedrooms and bathrooms, lot size, age, design style, and location.

The appraiser should understand the market in your area and should have an understanding of the value of any special features in your home. This is where appraisers can differ considerably, and experience helps a lot in determining the value of these special features. For instance, an experienced appraiser may have a better idea of how much an in-ground pool may add to the value of your home than a less experienced appraiser or one who is new to your area. 

Appraisers also consider the value added by improvements you have made to your home over the years. Improvements made some time ago may depreciate in value, or they simply may have cost more than the value they add to the home. You may love the track lighting in your sunroom, for example, but it might not affect the market value. 

All these factors added together help the appraiser determine the fair market value of your home. 

Specific Needs of Divorce Appraisals

If one spouse owned the home prior to getting married, then a historical appraisal, also called a retrospective appraisal, might be necessary to determine how much the house was worth at the time of marriage. 

At times, individual spouses (or their attorneys) may hire separate appraisers. If there is a significant discrepancy between the market values of each appraiser, a judge may decide to hire a third appraiser or may choose an average of the two appraisals to determine the value to be used in negotiating the division of marital property.

In the case of appraising a vacation home, it’s best to hire an appraiser who is familiar with the unique values associated with second homes or communities that are primarily resort or vacation home properties. 

Additional Considerations When Choosing an Appraiser

At times, appraisers are called upon to testify in court. The appraiser may only testify regarding the real estate appraisal and the data/analysis that supports it; the appraiser may not advocate for either party in the proceedings. 

While USPAP and other professional ethical organizations forbid appraisers from divulging information to anyone but their clients, an appraiser who is used to working with married couples – as opposed to divorcing ones – may make a few mistakes in communication that could be quite serious. 

If the appraiser is hired by both spouses, the appraiser may be under the assumption that, as with most married couples, if you tell one spouse something, he or she will communicate the information to the other spouse. This, however, is not always true when couples are divorcing. Therefore, your appraiser should have a system in place to ensure that all communication gets shared with both spouses in an equal and unbiased manner. At the same time, if only one spouse has hired the appraiser, there must be vigilance to not accidentally divulge information to the other spouse. 

How We Can Help

Next Act Properties, Inc. specializes in helping divorcing couples determine the best option for them: buying out your spouse and refinancing the mortgage, selling your house to a third party, or our unique sell-and-lease-back option that will allow the spouse who wants to remain in the house to do so. Our nationwide network of real estate agents and mortgage specialists are experts in divorce real estate sales and divorce mortgage refinancings. We can help you navigate these challenging waters and get you the best outcome for you and your home. Contact us today.

When selling a home, homeowners should choose their real estate agent wisely, doing research in order to find the right agent for their particular needs. For divorcing couples, this is even more important because of the unique legal, financial, and emotional aspects of their situation. Not every real estate agent is up to the task. The best real estate agents for divorcing or separating couples have certain qualities you should look for. 

Particular Qualities to Look for in Your Agent 

  • Specialized training and experience: Agents who specialize in handling divorcing couples train in the legal, financial, and tax aspects of the process. Surprisingly, only about 1% of realtors actually receive specialized training for handling divorce-related real estate transactions even though close to 50% of marriages ultimately end in divorce and the vast majority of those divorcing couples are homeowners. This knowledge is critical in order for you to avoid prolonged, unnecessarily unpleasant settlements and costly financial losses. 
  • Communication procedures that keep all parties informed: An agent who has experience with divorcing couples has systems in place to keep both parties and their legal counsel fully informed at each step of the process. These special real estate agents will be able to maintain neutrality while providing equal and unbiased support and communication to all involved. Both spouses need to feel confident that their real estate agent is not showing preference and has the interests of both parties in mind equally when executing his or her functions as their agent.
  • Ability to land the sale at close to the listing price:  Every homeowner should look for this quality, but for divorcing couples, it’s even more critical. A track record of selling at or near list price shows that the agent asks the right questions upfront; can get an accurate appraisal; knows the market in the area; can expertly stage a house; and knows the art of the sale. An agent who can get a price close to the listing price will be able to avoid additional disagreements or squabbles between the spouses at closing, bring about a settlement quickly, and get a financial payout for the house so his or her clients can move through the divorce process faster. 
  • Finely tuned negotiation skills: This is closely connected with the last two qualities, referring not only to the ability to negotiate a good price for the home but also the ability to negotiate and moderate disagreements among spouses and their attorneys. An agent needs the art of diplomacy – the ability to moderate highly emotional conversations calmly and direct them toward the goal of reaching an agreement in order to sell the home. Real estate agents who specialize in divorce cases have learned this fine art.

Your Next Step 

Next Act Properties, Inc., through our real estate brokerage subsidiary, Next Act Realty, LLC, can help you sell your house through our nationwide network of divorce real estate experts. We have done the research and have vetted a team of expert agents across the country. These agents have specialized training in the unique financial, legal, and tax aspects of selling real estate in the context of divorce and have many years of experience helping divorcing couples sell their marital homes. Contact us today to see how we can help you.