Option 1 – Buying another home.
You will likely have another home to sell and an existing mortgage or mortgages to deal with. Your realtor will be able to provide you with a realistic sale price on your current home. You must check with your current mortgage holder to determine the balance, interest rate, remaining amortization and penalty (if you are to pay it off). This should be done prior to meeting with us. One of the options to avoid the penalty is to port the mortgage to your next property. If this ends up being the best option, we will recommend the same to you.
If both you and your partner will both be buying, then this is another issue for you to resolve. You both can not take the mortgage with you!
We will always try and work out a plan based on a worst case scenario – such as – what is the least you will sell for and the most you will buy for?
Click here to a visual of the process you will likely go through while working with us.
We will develop a closing cost sheet based on your eventual sale and your purchase in order to determine if there are enough funds for this to happen. At this time we will project if any other debts need to be paid off, legal bills, etc for this all to work out.
Assuming everything works out and you qualify for a new mortgage, depending on your timing, we will then obtain a written pre-approval to lock in an interest rate for you for the next 120 days (in most cases). We then have to wait for the other parts of your divorce to be worked out before any offers should be written. There are so many variables which affect this part of the process, that it is imperative that everyone involved fully understands what assumptions we are proceeding on.
Option 2 – Buying out your partner
In order for this to happen, you will need to know your share of the equity. Therefore you must:
- Value the house
- Subtract the outstanding mortgage (including penalties) balance;
- Calculate your share of the remaining equity
Example: Bob and Susan own a home valued at $300,000, subject to a first mortgage of $200,000. The remaining equity is therefore $100,000. If their assets were split 50/50, each would then receive $50,000. If Bob were to buy Susan out, he would have to give her $50,000. This is only a simple example as every situation could be different.
In order to determine what your home is worth, there are several options.
- Get one or two qualified appraisers to give you an uncontroversial valuation. This will cost some money, but will save any disagreements.
- Your property tax assessment is a tool, but is done for taxation purposes and should not be relied upon for this step.
- You could have 2 realtors give you opinions, but you may not trust each others choice in this area.
Have your lawyer recommend which way to go on this. I would recommend the appraiser route.
Buying out your partner and keeping the family home is an option we often see for many varied reasons.
The same initial process is required to determine if you can qualify and afford the mortgage. The party you are buying out will need to know that they will be removed from the current mortgage. That is done by one of 2 ways.
- Paying off the current Mortgage.
- Having your current mortgage holder agree in writing to remove the leaving party. This means you will have to qualify for this.
We arrange for a new mortgage (with a new company or your current mortgage holder) to buy out the leaving party. Often times, this is a short term step, as you do not know how long you will be staying in this home. In addition, things such as paying down debts, home improvements, purchasing vehicles and even making funds available to help with the payments are often part of the decision making process in determining if this is an option for you.
If this is an option you choose to pursue, then we will create a range of prices for you in order for you and your lawyer to know what numbers you have to work with.
Option 3- Rent
Sometimes this is the best option depending on your individual circumstances. We will make you aware of all of your available options if this is the case. You will know what has to be done in order for you to get back into the housing market.
Other things to consider at this time:
- Protecting your credit during the divorce process. Make sure all of your bills are paid on time throughout the process. Make sure credit cards are cancelled or get in touch with your creditors. If you are jointly responsible for any debts or leases, this is a must do step at the first possible moment. Too many times we have seen this happen with devastating results to the non offending person.