It is tough and it is emotional, and sometimes hard to get practical.

Here's some help on what you should consider.

Who will retain possession of the home?

How will the vacating spouse be compensated?

What is the fair market value of the home?

How can the equity be accessed?

Do we need to refinance or sell the home?

What difficulties are involved with selling or refinancing?

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Recommended Reading:

When a Marriage Ends Tax Planning

When A Marriage Ends What Happens to the House?

Mortgages & Qualification

Qualification for a new mortgage can be a challenge for divorced individuals. Alimony and child support payments often adversely affect one’s ability to qualify.

Payment of these items may affect qualification ratios, while receipt of these payments for less than an established period of time often disqualifies their ability to be considered as income.

For these reason, pursuit of alternative mortgage financing is often necessary. The most common of these is NO Income Documentation Loan. Under the guidelines of these types of programs, qualification is based solely on an individual’s credit history and equity, rather than their income.

No Income Documentation Loans, Or “NODOC” Loans, as they often are referred to, are excellent alternatives for individuals who have not worked in some time, are currently unemployed, or are just starting new jobs.

Unfortunately, these loans aren't as easily available now that the subprime meltdown has changed the landscape of lenders left alive and mortgage programs they will allow.

You are better off planning for a full doc loan, and following the advice on How a Divorce affects Mortgage, Credit and Estate Planning.

Keeping the House:

If you currently do not have a mortgage on you home, a quit-claim deed is the easiest way to transfer title from one spouse to another. Your attorney can draw this document for you. Recording costs are nominal.

While a quit-claim deed will transfer ownership, it does not remove the vacating spouse from current or future financial responsibility on the mortgage. Only through satisfaction of the existing mortgage will the vacating spouse be free of this obligation.

Without such satisfaction, the vacating spouse will bear the exposure of the mortgage on their credit record. This will result in the responsibility for any delinquency on the account. Carrying the additional debt may also affect their ability to qualify for future mortgage, auto, and consumer financing.

Refinancing serves as a valuable tool to facilitate removal of the vacating spouse from any and all financial obligations on the marital home.

Compensating the Vacating Spouse

Options for compensation of the vacating spouse will vary depending on available equity in the home as well as borrowing power of the remaining spouse.

If the remaining spouse qualifies for a new mortgage, a “cash-out” refinance will allow them to compensate the vacating spouse by drawing cash out of the equity in the property.

If qualification for “cash-out” is not possible, compensation will need to be arranged through the liquidation and transfer of marital property.

The value of the martial home can be determined through an appraiser, who will arrive at the value after a thorough analysis of existing market conditions and recent sales. To avoid disagreements over value, both parties should agree on who will complete the appraisal.

If neither party wishes to remain in the marital home, or if neither party can qualify to refinance, sale of the home may be the only option. In this case, we can provide referrals to reputable real estate agents. We can also assist either spouse in qualifying for the purchase of a new home.