Afamily law attorney knows that many complicated issues generally arise during the process of ending a marriage. One of the biggest questions many couples face is what to do about a shared family home. For most people, their home is the biggest asset they will divide. It is also an asset that many couples have a shared mortgage on, which complicates things further.
Recently, the Wall Street Journal published a comprehensive article on some of the issues that arise regarding splitting up the house.
What Happens to the Family Home in a Divorce?
There are two options for what to do with the family home during the divorce: selling the house and splitting the proceeds or transferring the home to only one of the two spouses. When the home must be transferred to one of the two spouses, the issue arises about what to do with the mortgage.
Ideally, the spouse who keeps the house will be able to refinance the loan into his name only. If this can’t happen, the other spouse faces the risk of foreclosure and ruined credit if the person who keeps the house doesn’t pay. Furthermore, if the loan stays in both names, the spouse who doesn’t keep the house will have this outstanding mortgage balance on his or her credit report and may find it difficult to get another mortgage to buy a home of his own.
Unfortunately, refinancing is not always an option. Refinancing into only one name can be a challenge in any situation, but this is especially true when the home requires a jumbo mortgage above the government limits of $417,0000.
The problem is that federal rules set a maximum debt-to-income ratio (DTI) of 43 percent. If the couple qualified with both incomes, the spouse who now seeks to refinance may not have a high enough income to qualify on his own. If alimony and child support are going to be paid to the spouse that keeps the house, this is still not going to be enough because the alimony and support has to be received for a full year before the lender counts it as reliable income. Obviously, this has not yet happened at the time when the marriage ends and the couple is trying to refinance.
Even in cases where the main breadwinner is the person who is going to keep the house, there are still issues because that spouse’s debt to income ration is reduced by the alimony and child support that must be paid. Because divorces can be costly, those who end their marriages may also have credit card debt that makes it more complicated to get a new mortgage.
The mortgage issue is only one of the problems that can arise when dealing with the family home during divorce. Removing one of the spouse’s from the home’s title can also be complicated and mistakes could be made. This could tie up the refinance process for months or could make it difficult to sell the home in the future.
Because it is so complicated to deal with the sale of a home during divorce, it is important for the spouses to be represented by an experienced attorney.
Contact Bertolino LLP at 512-717-5432 to schedule a consultation with an Austin, TX divorce lawyer today. Serving Austin and surrounding suburbs including Round Rock, Cedar Park, Georgetown and San Marcos.