Should We Sell The House Before Or After Divorce
Whether you sell the house before or after your divorce will be a function of your financial circumstances and your ultimate goals for your post-divorce living arrangements.If you and your spouse agree to sell the house before you file for divorce or while the divorce is pending, the divorce court can still account for the sale proceeds as part of the divorce to make sure that the money was fairly allocated between you, taking into consideration the totality of your financial circumstances and all other property to be divided.
Any agreement between you and your spouse as to how to distribute or use the proceeds from the sale of your home can still be subject to review and modification by the court. An attorney can help you formalize any agreements you may have in an effort to ensure the court will honor those agreements and not change them unexpectedly.
If you and your spouse agree to sell the house after the divorce is final, you will include your agreements about how to sell the house and how to share the proceeds in your Marital Settlement Agreement. You will have to discuss and consider such issues as what items to include or exclude from the sale, whether to use a realtor or to try a For Sale by Owner first, how/when to make price adjustments and what to do if one of you wants to accept an offer but the other does not. Usually, the divorce court will maintain jurisdiction of these issues to monitor and help resolve any problems that may arise along the way.
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Purchasing A New Home
While purchasing a new home might not offer you the security you have in your existing home, it is a good way to start your new life. By buying a separate property with a new mortgage, you do not have to worry about removing your spouse from the loan or title documents.
If you are court-ordered to pay your spouse a divorce settlement or make alimony payments, a new mortgage with a lower payment might be a better option for you.
If you decide to purchase a new home, you can use your portion of the proceeds from the sale to pay off any money you owe your ex-spouse for their interest in community property you shared. You can then start over with a new mortgage in a home that fits your life as a single person.
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Getting Legal Help With A Divorce In Arkansas
Knowing how to file for divorce in Arkansas is just the beginning. It is important to understand not only the divorce process but also your rights with regard to property, custody and support. An Arkansas divorce lawyer can help you throughout the process of dissolving your marriage to ensure your divorce goes as smoothly as possible and your divorce settlement is one that you can live with going forward.
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What You Can Do To Get Off The Mortgage
The recourse for your ex failing to remove your name from the mortgage can be fairly limited if you have an ambiguously written decree, so it is important that your attorney includes specific provisions in your property settlement agreement to help protect you in the event that your ex does not or cannot take you off the loan.
For example, you will want very specific deadlines in your property settlements, such as a requirement for the house to be refinanced within a certain timeframe. This would give you the ability to level contempt charges if the order is not followed.
However, if your ex is simply unable to comply with the order , it may not be very effective they cannot get in trouble for failing to follow an order that they do not have the ability to follow.
To give some extra protection, you could also include a condition that if the mortgage is not refinanced within the deadline for any reason, the house should be immediately put on the market. Additionally, you could include provisions that covered specific aspects of a potential sale, such as choice of realtors, getting an appraisal, sale price, choosing an offer, etc.
What Is A Loan Assumption
Assuming a loan means you take over an existing loan with the terms that are currently agreed upon with the lender.
This means the mortgage payment, interest rate, and loan term remain the same.
The only difference is that your ex-spouses name is removed from the document.This leaves you as the one who is legally responsible for the loan. You will need to discuss this with your lender to determine if this is something possible.
Some lenders charge a flat rate to the party assuming the loan. For government-backed loans, agencies might regulate assumption fees.
If your lender requires you to purchase a new title policy, the title company will also require you to pay some fees to process the title policy request, and if the lender or title company has an attorney review your documents, you will need to pay for that, too.
The fees you will need to pay depend on the loan type, your lender, and the title company who processes the assumption. So, be sure to ask your lender about all of the fees associated with assuming your loan if this is an option you would like to explore.
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Risk To Future Home Loan Eligibility
Keep in mind that leaving your exs name on the mortgage may impact their ability to buy a new home in the future.
A borrowers debt-to-income ratio is crucial when qualifying for a mortgage. When a potential home buyer is listed on another mortgage, that debt appears in their DTI and could affect the new loan application.
Pros Of Using An Ibuyer
- A great reason why using an iBuyer is ideal is that there are no realtors involved. There is no hassle of having to find a real estate agent that you trust. The whole selling process is between you and the iBuyer.
- When you are selling your house independently, it can take some time before you decide on the right offer. That isn’t the case with an iBuyer they typically close as fast as 24 hours.
- Through an iBuyer, you don’t have to worry about inspecting your home as it is not required to do. If any repairs need to be done, they will do it for you.
- A big hurdle that many homeowners face when selling their house is having to deal with showing the house at times that are inconvenient to them. iBuyers will deal with showing your house to potential buyers, and they will also take care of staging your home.
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Serving Divorce Paperwork In Arkansas
After you have filed your divorce paperwork, you must serve your spouse with a summons. This means providing proper notification to your spouse that you filed divorce proceedings. You can serve your spouse a summons by:
- First class mail accompanied by a Form for Notice and Acknowledgment of Service by Mail.
- Certified mail with return receipt requested
If your spouse does not acknowledge service by mail within 20 days, you will need to pay for the sheriffs office or a private company to serve your spouse with papers. Unless there was justification for not acknowledging service by mail, your spouse may be ordered to pay for the costs associated with this process.
If you are unable to find your spouse, you can provide notice through publication in a local newspaper with court approval
After your spouse receives notice, they must respond to the court or you can petition to move forward with a default divorce. This would mean the court grants you the dissolution of marriage and your other requests included in your divorce petition.
Option : Refinancing After Finalizing The Divorce
The last option for refinancing by divorce would be after the divorce is finalized. In many divorces, one of the parties will have to pay alimony, maintenance or child support. To a mortgage lender, these payments are viewed as a monthly obligation, similar to a car payment. When trying to refinance, this will be included in your debt-to-income ratio, which affects your new rates. The process becomes more complicated when the receiving party of the alimony or child support wants to use that money to stay in the home. This can be done, but its not automatic. There is a required six-month period to ensure the party is actually receiving the alimony or child support before a mortgage lender can include that as income when calculating DTI.
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What To Do When Things Get Complicated
Divorce can bring out the worst in people, and many times, an ex spouse will not be willing to sell the home or some other issue. This is why it is important to consult with a divorce attorney. A divorce attorney can help you understand your legal rights when it comes to the mortgage and protect you from doing something unwise.
It is a good idea not to finalize the divorce until your mortgage issues are settled. Be prepared to get court orders to make your ex remove your name off of the mortgage through selling or refinancing.
No one buys a house with their spouse with intent on getting a divorce. Unfortunately, these things happen. It is best to protect yourself and your assets by making decisions based on logic rather than emotions.
Seek A Mortgage Assumption
A mortgage assumption allows you to take over the mortgage payments and release your former spouse from any financial liability. Of course, your lender has to sign off on this first and will check your credit score, DTI and income.
And you must be current on your mortgage payments. But if your lender agrees, an assumable mortgage may be a good alternative to refinancing after divorce.
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You Could Sell The House
If neither of you can refinance or can afford the payments independently, selling the house is often the best option. Home prices are fairly high today — it’s undoubtedly a seller’s market. You should be able to get a fair price for your home, then split the proceeds as part of your divorce settlement.
Of course, the downside is that you’ll each need to find a new place to live. That could be challenging when housing inventory is tight as it is right now. But unless you can refinance, this may be the only surefire way to protect both spouses from financial disaster. If one of you promises to pay a shared mortgage and doesn’t follow through, you will both regret it.
Mortgages Can Cause Serious Financial Problems Post
A house is typically the largest asset a married couple acquires. Because of this, it is also one of the most complicated to divide if it comes time to go your separate ways.
Determining what happens with the home will likely be one of the most complex issues of a divorce, which makes having an attorney advise you on the potential options and ramifications extremely important.
One of the most common decisions in a divorce judgment is to simply award the home to one party and subtract the equity from their pool of the marital assets. .
While this may seem like a simple solution, it does have its complications: The party not awarded the home will remain on the mortgage and is therefore still liable for the debt unless the loan can be refinanced something that can be a big question mark in the current market.
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When Divorcing The Mortgage Is Not An Option
Not all divorcees will be positioned to qualify to take over responsibility for the entire mortgage on their own.
This problem is worsened when the spouse retaining ownership needs to pull cash from the property in order to complete their buyout or equalizing payment.
In certain scenarios, the departing spouse or the out-spouse will agree to keep their name on the mortgage while giving the in-spouse exclusive rights and ownership of the home.
While this may be the path of least resistance, it presents several unique questions:
Who is Responsible for the Mortgage Payments? Am I Responsible for Half the Mortgage if my Ex Stays in the Home?
As we discussed earlier, this question is two-fold. There is a difference between responsibility from a credit perspective, and responsibility from a legal perspective.
As long as your name is listed on the mortgage documents as one of the owners of the home, then you and anyone else listed as a borrower are financially responsible for the mortgage payments as far as the creditor and the credit bureaus are concerned.
It does not matter if only one of you continues to live in the home or not. And even if you work out an agreement for one spouse to pay, if either of you misses a payment and your name is on the mortgage, the delinquencies will affect both of your credit profiles.
A joint mortgage means you share joint responsibility until the home is sold or your name is removed through refinancing.
Remove Your Spouse From The Mortgage Loan
The first thing to know is if youre keeping the house, you will typically be required to refinance the mortgage as part of the divorce settlement.
If part of the reason you got a divorce is that there were money issues in your marriage, then a driving factor for protecting your credit will be to remove your spouse from the loan, assuming you want to keep the family home.
Removing your spouse from the mortgage can be challenging because youll need to requalify on your own. If you and your spouse both contributed financially to house payments before, you could be in for a bad surprise unless you are a high income wage earner.
When you take on a mortgage by yourself, youll need to show proof of income, proof of insurance, proof of debts and assets, and your current credit score.
Essentially, you both remain liable for the mortgage unless you sell the home, pay off the home or you or your spouse refinances the home to remove your name. Until that time, if either spouse misses a payment, both parties will take a hit to their credit. The lender does not care about your divorce. They only care about being paid by the people who agreed to do so when the mortgage was agreed upon.
Another thing to note is that many people mistakenly believe that removing a spouse from the title to the house is the same as coming off the mortgage. Thats not the case. They are two separate transactions.
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What Are The Tax Implications Of A Refinance In A Divorce Situation
Homeownership is one of the best ways to get big tax breaks. When you buy out your spouse as part of a divorce, your ex is giving up both a significant tangible asset and a primary tax shelter.
Thats why some couples dont sell or refinance after splitting up, they both want to hang on to that tax shelter. But this decision can negatively impact your financial situation in the long term.
In a divorce, the judge rules on how the property is to be dispositioned, but most of the time, the parties do not do what is ordered, says Guettler. So, both remain on title and are equally obligated on the loan. If one defaults, then it adversely affects both parties.
If youre the one moving out, you should insist that your spouse refinance the property as the sole owner, or they could default on the loan and hurt your chances to buy another house.
However, there are circumstances where hanging on to the house after a divorce is a good ideaat least for the short term.
Even in a divorce situation, the federal government may consider it an investment property if you sell a home that youve owned for less than two years, advises Shaw.
Both parties may be responsible for 50% of the taxes on 50% of the profits from the home sale. So those tax implications, could influence your decision to either postpone your divorce to get past that two-year mark, or to sell the house after the divorce.
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