Tag Archive for: divorce

Going through a divorce can be an extremely trying time and deciding what to do with the marital home can create a lot of emotion and stress, especially if there are children involved. At Next Act Properties, we specialize in providing real estate solutions for divorcing and divorced people. We know how to help you collect the information you will need to quickly and efficiently obtain mortgage financing during or after your divorce.

If one spouse would like to keep the home after divorce, it is highly likely that he or she will need to refinance the existing mortgage into his or her own name, since the other spouse will not want to remain obligated for a mortgage on a home they no longer own.

Since every divorce is unique, some divorcing couples may require different documentation than others; but in our experience, the following are the most common documents you will need to provide to the lending organization:

  • Standard mortgage financing documents:  These include proof of employment income, business income, rental property income, disability income, and divorce-related income (provided the applicant wants to disclose and rely on income from alimony, child support, and/or a property settlement note); tax returns; proof of assets (such as bank, investment, retirement statements, etc.); liabilities (such as credit cards; auto, student, mortgage and other loans; alimony and child support if you are the one paying; etc.); credit scores and reports from all 3 credit agencies; a property appraisal; etc.
  • Executed copy of the final Divorce Settlement Agreement and/or Divorce Decree: Although you may feel it’s none of the lender’s business, they must perform their due diligence and confirm any court-ordered assignment of marital debt as well as the amounts and duration of any alimony and/or child support payments. An executed copy is one that is executed by a judge and stamped by the court.
  • Proof of receipt of alimony and/or child support payments: In order for alimony and/or child support to be accepted as qualified income, you must be able to fulfill the “6/36 rule”. You must show you have received each payment consistently and on time for at least the previous 6 months and demonstrate that you will receive it for at least 36 more months (3 years) from the signing of your new mortgage. 
  • Proof of age of children for whom child support is paid: As part of the 6/36 rule, you may be required to show legal documentation proving the age of your children, such as a birth certificate, in order to demonstrate they will be eligible for child support for at least 36 more months. 
  • Property Settlement Note income: If a Property Settlement Note is being used as income, this has a more strict requirement. You must demonstrate you have received consistent and on-time payments for the previous 12 months and will continue to receive them for another 36 months from the signing of your new mortgage. 

Reach out to us here at Next Act Properties to see how we can help you with your mortgage financing or other real estate needs during or after your divorce.  

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

In general, 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, in general,
  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.

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 or Colorado, 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.

When couples get divorced, they must determine the full extent of their marital property, both assets and liabilities, for division between the spouses. For most divorcing couples, the largest asset they have is their family home. Many emotions are attached to the home, but there are also many practical concerns that must be considered when deciding how to divide ownership in the property in a way that best benefits the family.

Option 1: Maintain Joint Ownership After the Divorce

This is almost never recommended. If a couple is splitting, there are likely very good reasons, and joint ownership of a large asset is likely to perpetuate or even increase friction between them. However, there are times when this might be a good short-term option as the couple continues to determine the best next step.

Option 2: Sell the House

At first glance, selling the marital home seems like the easiest option. A complete appraisal of the property and improvements made over the years will determine the market value of the home. You’ll need a real estate agent who specializes in divorce-settlement home sales, as this sort of sale is significantly different from selling a home for a single individual or a married couple. You’ll want to find someone whom both of you can trust and will defer to.

Ask yourself: Do you need a quick sale or should you wait for top dollar? Which of you will handle the details? Who will pay for necessary upgrades to make the home more sale-able? Who will handle price negotiation? Your Divorce Settlement Agreement should detail most of this.

The answers to these questions can complicate the sale of a house for a divorcing couple since there are bound to be disagreements. In addition, leaving the family home can cause great distress and upheaval for children, and may include the need to change schools and lose touch with friends, adding additional trauma to the already distressing situation of their parents’ divorce.

Option 3: Let One Spouse Keep the House

Keeping the house can be a comforting choice for a spouse emotionally attached to the home. And if children are still in the home, this is often the least traumatic option for them. Since mothers usually take custody of the children, wives are often more likely to want to keep the home. But this requires the spouse receiving the house to buy out the other spouse’s share of the equity.

As with a sale of the home, an appraisal is necessary to determine fair market value. The spouse keeping the house would be responsible for paying a portion of the equity (often half, but not always) to the other spouse (equity = house value minus existing mortgages and liens). This is where things get complicated.

First of all, the spouse keeping the house will probably need to refinance the existing mortgage(s) since the other spouse will almost always want to have their name removed from the mortgage(s) on a house they will no longer own.

And how will the spouse who is keeping the home pay such a large sum to the other spouse? If there aren’t sufficient other assets, the spouse keeping the home can try to refinance with an equity buyout or cash-out mortgage, providing additional funds to pay off the ex. But in many cases, especially when the wife is keeping the home, she might not have sufficient qualified income (alimony and child support payments can be used to show income if certain requirements are met) or sufficient credit history to be able to refinance or get the needed loan.

The cost of buying out the spouse is only one consideration in keeping the house. One must also factor in real estate taxes and expenses for upkeep: utilities, regular upkeep, and major home repairs must all be budgeted into the cost of keeping the home.

What is a person to do? We offer a unique option.

Option 4: Sale-Leaseback

This option combines the benefits of options 2 and 3 with the least amount of stress and anxiety, satisfying both spouses. Next Act Properties will buy the marital home from the divorcing couple and lease the home back to the spouse who is staying. This option provides a very quick, satisfying resolution of a prickly and emotionally charged situation.

Whatever option you determine you need, or if you’d like to talk to someone about which option might be best for you, please contact us at Next Act Properties today to help you resolve this aspect of your divorce.