DEALING WITH MORTGAGES DURING DIVORCE
by Linda M. Leever

When people who own real estate get divorced, they usually face decisions about mortgages. These decisions are important because they directly impact future financial well-being. It is best to educate yourself about the options and seek the advice of a professional mortgage broker.

If you are assuming ownership of your marital residence or other marital property, it is usually necessary to remove your spouse's name from the mortgage obligation on the property. There are two options available to achieve that goal: mortgage assumption or mortgage refinance. Your choice should be based on an analysis of the cost and interest rate for each of the options.

Mortgage assumption is usually the most inexpensive method. However, it is not available in all cases. A call must be made to the existing mortgage company to ask the following four questions. (l) Do they allow assumptions; (2) What is the interest rate; (3) What is the cost of completing the assumption; and (4) What is necessary for you to qualify for the assumption. If it is available and you qualify, you should choose a mortgage assumption if your current mortgage interest rate is equal to or lower than current interest rates. If the interest rate is higher you should investigate the mortgage refinance option before your make your decision.

For a mortgage refinance or a mortgage on a new property purchased, you should begin with contacting an experienced mortgage broker.

A new mortgage application will be taken and the broker will explain the different programs available. A new mortgage application and appraisal are completed. Many different mortgage programs are available to meet the various needs of the homeowner. Full income verification mortgages are the most popular, however, for those unable to document enough income to support the mortgage, No income Verification mortgages are also available, but carry higher interest rates. Types of mortgages include fixed rate or adjustable rate mortgages. Your broker will discuss your needs and help you decide which is best for you.

Qualifying for a mortgage can be a major concern. If you are purchasing a new property, you should see your mortgage broker when you start looking, so that you can be pre-qualified. In general, mortgage companies have guidelines that your mortgage, tax and insurance costs should not exceed 33% of your gross monthly income. Simultaneously, they compare your total current monthly debt obligations (including mortgages, credit cards, child support, etc.) to your earnings and have a guideline that your debt should not be more than 38% of your gross monthly income. Of course an experienced and creative mortgage broker can help you get financing even though your mortgage and debt percentages are higher.