Marc Edelstein from Ross Mortgage is back with us. We are discussing mortgages for those considering divorce and navigating the high-interest rate environment. As a CDLP Certified Divorce Lending Professional, Marc sheds light on the complexities of mortgage financing during divorce proceedings, addressing the common question of how to assume an existing mortgage with a low-interest rate while removing the former spouse from financial liability.
Marc distinguishes between two types of assumptions in the context of mortgage financing: simplified assumptions and qualified assumptions. In a simplified assumption, one spouse takes responsibility for making the payments without removing the other spouse from the mortgage. The financial obligation of the original borrower remains. In a qualified assumption, the person awarded the home assumes the terms and releases the other spouse from financial liability. Marc also highlights the types of assumable loans, such as government-insured loans like FHA, VA, and rural development loans, as well as most adjustable-rate mortgages.
Paula raises a scenario where a couple is divorcing in a high-interest rate environment, and one spouse wishes to stay in the home but also wants to remove the other spouse’s name from the mortgage. Marc explains how this can be done, or you can wait until interest rates become more favorable or certain life events occur, like children graduating from school. This arrangement doesn’t affect the departing spouse’s ability to find new housing.
The conversation touches on the importance of considering the equity buyout in a divorce settlement. If one spouse has to buy out the other’s equity portion, they need to be careful about the assets they use for this purpose. Cash and traditional IRAs are not equivalent. Marc emphasizes the need for clear communication and agreements in these matters.
The discussion also delves into managing mortgage communication when one spouse is not on the mortgage. The law grants the person awarded the home “successor’s interest,” giving them the same rights as the spouse on the mortgage, including access to mortgage information, grace periods, and protection against due-on-sale clauses.
It’s always important to consult professionals, such as financial advisors, CDFA professionals, and CPAs, to make informed decisions during divorce proceedings. Marc’s contact information is shared for those seeking mortgage-related advice.
Find mark at thatmortgagebanker.com or at (248) 379-6749.
Reach Paula at paula@paulachristine.com or through her website, paulachristine.com.