Thinking about a second mortgage before divorce? Here are some things you may want to know. Mortgages and loans can be tricky and have many factors when going through divorce. Why do lenders want to know the details of your divorce? Because everything can change after the divorce and these changes determine when and how they collect on the loans and mortgages.

The details listed below are items lenders want to know: Alimony and child support: One spouse may be paying alimony or child support. This can affect monthly debts for the spouse paying and may determine how much they can afford to pay on the loan. Division of Assets: Most divorce settlements require a division of assets such as a savings account. If a lender requires reserves or available cash funds to apply for the loan, this may actually affect qualifying for a loan. The final divorce decree: This may require that the property be sold as a part of the division of assets. Lenders do not want to lend money to properties that will soon go on the market after the divorce because they do not make money on the property until several months after the loan closes.  Divorces can cause the spouse to buy out the property from the other spouse in the separation of assets. Did you have to purchase the home from your ex-spouse?Once you have filed for divorce and the papers are already in process, this does not stop you from getting a loan, but many factors might come into play as the divorce papers might be drastically altered after the divorce proceedings. This can then change the terms of the loan.

If you need to refinance on your mortgage, but paperwork has not been filled out and you need to refinance to get the cash to buy out the other spouse, you’ll want to apply and close you loan before you file your divorce paperwork with the county’s records office. This is due to the fact that once the divorce is final; the paper work may have changed.

In the beginning of the proceedings, the initial divorce papers write out the separation of property and child/spousal support. This document is not binding. Any decision made in these papers can be altered before the divorce is finalized by both spouses and/or by a judge. The lender requires the final decree then signed by the judge to validate information on the original loan application.

Now if both spouses are on the property loan, but one will keep the property after the divorce is final, then the person leaving the property would sign a quit claim releasing any ownership interest.

If the loan is not refinanced under the single owner’s name, then the ex-spouse is still on the loan and can still be liable for payments- even if they have no ownership interest. The debt will still be on the spouses’ credit reports and may possibly be a determination when going to buy a new home and applying for a new loan.

If the spouse who still owns the old home defaults on the loan, the other is still responsible for payments and must take precautionary measures because this affects their credit too.

If the ex-spouses name is removed from the title it cannot be removed from the mortgage loan papers. Lenders do not allow anyone to be removed from a loan to protect their investment. Anyone can be added to a loan.

To purchase a new home after the divorce, the ex-spouse will have to prove and document they make enough income to qualify not only for new loan but be able to pay the mortgage on the old home as well.

All this can affect your credit and qualifying for new loans.

By: Deborah E Smith

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