Mortgages and Divorce
I know everyone is different and we all have different likes and desires. Some like a home in the country while others like the city life. I always loved the outdoors, the wildlife and going deep in to the forest. I could live on a mountain side forever. My wife on the other hand would rather live in a high-rise condo in the city. Some place where she could just step outside and walk to the store across the street and browse all day long. With all that said it’s amazing we have been married 30 years.
For many people differences in life or life-styles cannot be compromised and therefore their relationships end. For what ever the reason(s) people split, everyone needs to move on and need a place to live. Going through a divorce is most often very painful emotionally and financially for people.
The Reality of Mortgages and Divorce
This past six months I have worked with more people going through a divorce while one or both partners are trying to purchase a home for their new start. This can and has the possibility to be very positive for each partner, However, only one out of every four people ever care to help each other out. About half say they will in the beginning, but fail to preform for each other in the end.
My goal here is to be able to explain to everyone how to help each of you to get into your own new home. The divorce is hard enough, not only on each partner but everyone who is around them. Remember that the faster you help each other out the faster you can complete your separation. Making it ugly only causes each of you to lose money and possibly having long term damage to your own credit. The negative credit impact could cost your thousands of dollars over the next 10 or even 20 years. The most common phrase I hear is “I don’t care I just want to get him/her back!” This is a normal emotional reaction, but a stupid one when action is carried out.
Let’s look at the basic components of buying the new home and how it could possibly fit each of you during your divorce.
- The real estate purchase and sales agreement; this could be by one individual or together if one is needing the others income to qualify for the home until things have stabilized. If as an individual, even if you are still married and the divorce is not finalized, if one enters into a real estate purchase and sales agreement it does not obligate the other spouse to anything including liability.
- The Deed or Title; The title to the property will be taken as written in the real estate purchase and sales agreement, either as an individual or as a couple. If taken as a couple the deed can always be ‘quick claimed’ over to one of the partners per the final term in the divorce papers.
- Financing the home; This part breaks down in to two separate parts.
- The “Promissory Note” this is the loan instrument of the financing part. Whoever will be responsible or the one who is Applying for financing will sign the promissory note. This is the person responsible for making the month payment. This will show up on their credit report. This can be done as an individual if you can qualify by yourself. Generally, if it is an individual, they are the only one on the deed or title. The promissory note is your promise to pay back the money the lender is giving you to buy the home.
- The “Mortgage” this is the most confusing part of the transaction because even the government miss uses the word mortgage. It is without a doubt the most misused word out their today. The mortgage is NOT the loan, it is not the debt instrument. It is not what shows up on your credit report. You do not have a mortgage on your home even though that’s how it is said. The mortgage is the many multiple paper document, although written by the lender it’s the document you give to the lender. It is you stating that you will surrender all your interest in the property or home. It is you saying you surrender your right to homestead if you default on you promise to repay the money you owe. Even if you are the spouse who is not on the loan application and did not sign the promissory note you have to sign the mortgage to wave your marital interest and rights to homestead in case your spouse defaults on the promissory note. If you spouse does not pay the loan and you are not on the note you are not responsible for paying the loan or it having a negative impact on your credit. If you’re not on the loan do not put your name on the deed/title.
Helping each other move forward in life is less stressful than fighting. If you have questions about financing ask me or call your attorney for your legal question or have your attorney call me. I want you to understand everything. I want to help both of you move forward. So ask questions get all your facts, stay positive and we will see you at a happy closing table.