Heading for divorce? Consider these tips on real estate assets

Guest Opinion

By Catherine Eusea

Many people going through divorce — and their attorneys — are surprised and sometimes regretful of the complexities affecting a current home and mortgage, as well as the importance of planning for your next housing. In nearly 20 years of working with home buyers and sellers, my team and I have developed these tips to know when getting a divorce with regard to current real estate, and planning for a next home.

1. Before settling the divorce, find out your options to refinance the current home or to purchase a new home, which can have advantages and disadvantages for both parties, if not fully explored.

2. If you need to refinance the home to pay out equity per the divorce decree to the other party, it is NOT considered a cash out.  Before the divorce is final, you may want to negotiate the costs associated with a refi or other transaction affecting the payout.

3. The ability to use child support as income to qualify for a new home depends on the length of time it is scheduled to continue from the time of mortgage application and how long it may last.

4. Similarly, the ability to use alimony/maintenance as income to qualify for a home purchase also depends on the length of time you receive it from the time of application and how long you receive it.

5. If you don’t keep the home as a term of the divorce, you need to make sure to protect yourself so you’re not obligated or penalized if your ex-spouse has late payments going forward.

6. If you were not awarded the home in the divorce, in most circumstances a lender does not need to count the “old” house payment in a new home application, allowing you to purchase another home.

7. Similarly, credit cards or other financial accounts awarded in the divorce to the other party may not have to be counted against you in qualifying for a new home, depending on the loan. However, you may still be legally responsible for them and could bring your credit score down if there are late payments.

8. Are there rental properties or other real estate assets to separate? You need to know your risk of having to pay capital-gains tax if you were to sell jointly held or divorce-related assets.

9. Are you getting a lump sum payment instead of alimony/maintenance? You may not be able to use it as income so consider the best way to structure the pay out.

There are a variety of issues and options available to you, and your situation is optimized if you discuss things with experienced advisers in both law and real estate — ideally before court filings, but even after the divorce is final. Find out how different scenarios might play out and discover what is best for your situation.

Catherine Eusea is loan officer and area sales manager for First California Mortgage in Fort Collins. Reach her at 970-300-6777.

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