Depending on what each spouse wants and depending on each spouse’s unique financial circumstance, divvying up the family home in a way that makes everyone happy could prove difficult. A lot of times, one spouse will want the home, and the other will want to get his or her name off the mortgage. Sometimes, this is easy if both spouses have good credit, but sometimes refinancing the mortgage solely in the other spouse’s name is impossible. In such cases, it may be necessary to sell the residence outright.
One typical snag with regard to refinancing involves so-called “jumbo loans,” which are loans above the government-backed loan limit. The limit is $417,000 in most cases and up to $625,500 in certain high-priced neighborhoods. With jumbo loans, both individual income and net worth figures are important. For this reason, it is important to keep in mind that lenders do not tend to consider alimony and child support to be reliable income until after a year of payments have been received. Lenders will also want to see the spousal or child support payments continuing at least three years into the mortgage.
As for solutions, if ex-spouses receiving alimony and/or child support are having a difficult time getting approved, they might try to use some cash or assets received from a divorce settlement to make a larger down payment on a home mortgage. This could serve to reduce the amount of the loan, making monthly payments lower and making the loan easier to get approved. In other cases, a spouse might agree to keep his or her name on a mortgage, so that the ex-spouse can keep the family home, but this requires trust and confidence on the part of both spouses, and it also means that it will affect the other spouse’s credit report.
Even the moneyed spouse — the one who has to pay spousal or child support – could run into trouble trying to refinance a mortgage because his or her net income would be reduced by the monthly alimony and child support payments owed.
Because of the complexities involved with transferring home ownership during property division, Maryland couples are encouraged to discuss the matter with their divorce attorneys before completing any kind of agreements to remove a spouse’s name for home title and before executing a divorce agreement that requires one spouse to refinance.
Source: The Wall Street Journal, “In a Divorce, How One Spouse Can Keep the House” Anya Martin, Nov. 05, 2014
