Tidy Divorce Tidbit-Hanging onto the 3% Mortgage.

I saw this interesting article discussing how low interest mortgages sometimes cause stress for divorcing couples. With all the things you need to focus on during a divorce, one of the more important things is your finances, particularly, those surrounding your home and mortgage.

A Certified Divorce Coach and help you consider the options of separating you from you or your spouse from your mortgage. The article suggests several alternatives:

1- Buy time. The couple finalizes their divorce, but continues to co-own the home while waiting for rates to fall. This can be a pricey and socially difficult option if the partners remain owners, but stay in the home together.

2- Continue living together while you ‘wait and see’. Few are willing to give up their home and their low mortgage rate and move to a house that costs more because the interest rate is higher.

3- Co-owning the home until a certain milestone, such as their youngest child graduating from high school.

4- Sale leasebacks. Some couples are turning to sale lease-backs, where one individual sells the home to the other, and then rents it back from them with the option to repurchase their share later.

5- Refinance. Buy your independence by refinancing but understand that with the new title to the house comes a much higher monthly mortgage payment.

6- Assume the existing Mortgage. Some banks will allow the assumption of the spouse’s obligation at the existing rate. Many FHA and VA loans my be “assumed” by other people, particularly ex-spouses. In this process, the bank may permit one spouse to take over the existing mortgage at the same rate. According to the article, Fannie Mae guidelines give lenders some discretion to grant assumptions to people who are going through life transitions. Borrowers have to qualify for the mortgage and must be able to afford it on their own.

The Bottom Line. There are many financial issues at play in any divorce. Working with a divorce coach can help you prepare for your divorce, make the most of the situation, and mitigate the financial impacts of the transition. Set up an introductory discovery session or call with Peter Klose. The first consultation is absolutely free.