Refinancing and Divorce

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If you own a home chances are that you are joint on the mortgage with your spouse.  If you are going through the divorce process, getting someone’s name off of a mortgage is often a very important consideration.  Here are several things to think about:

  1. Title vs. Mortgage.  It is easy to remove someone’s name from the title to the property.  This is typically done by signing something called a Bargain and Sale Deed.  On the other hand, it can be very difficult to remove someone’s name from a mortgage.
  1. “Cash Out” Refinance.  Sometimes people need to do a “cash out” refinance in order to remove someone’s name from a mortgage and buyout their interest in the property.  Most lenders will only allow you to increase your mortgage up to 80% of the total value of the property (this is called “loan to value ratio”), although a few lenders will allow you to take up to 85% loan to value.  For example, if your home is worth $400,000 and you owe $280,000 and your lender will allow you to go up to 80% loan to value, this would mean that the maximum you could take out is $40,000 in cash which would put your total mortgage at $320,000 (which is 80% of $400,000).  This would allow you to remove the other person’s name from the mortgage and pay them $40,000, but you would then have a $320,000 mortgage.
  1. Low Income Refinance.  If someone has had little or no income for an extended period of time it will be difficult to refinance, but it’s not impossible.  Different lenders have different requirements, of course, but many lenders will work with someone if they can show that they have received support (spousal and child) for six months and will receive it for at least three more years at the level of support the lender is relying on.  You should check with your lender for their specific requirements.  Since different lenders may have different requirements you may consider checking with a few different lenders.
  1. When to File.  If you have a pending divorce case a lender may not want to work with you until the divorce is final.  From the lender’s perspective they want to make sure they know how much support someone is paying or receiving, and they also want to know if someone else will have an ownership interest in the house after the divorce.  One strategy that people will sometimes use is to complete the refinance before the divorce and then file the divorce once the refinance is complete.  If you are planning on doing this it is important that you answer your lender’s questions honestly about your situation.  For example, if they ask you if you are about to go through a divorce and you know you are, then you need to disclose that information.  Another strategy is to wait until the divorce is complete before filing for the refinance so you can provide the judgment to the lender immediately.
  1. Timing of Refinance.  It is important that you set a timeline on the refinance of the house.  People will frequently agree that the former spouse can remain in the home for a period of time until the home sells or can be refinanced.  If you are the person who moves out but your name is still on the mortgage, it is important from your perspective that you agree to a timeline by which your name must be off of the mortgage.  This timeline might be as little as three or six months, or it could be several years.  It is not unusual at all to agree to a timeline that allows a child to get through a certain school before requiring the refinance.  If the refinance cannot be accomplished, then typically the judgment says that the home must be sold.  Although this may seem harsh, the person who is not living on the home needs to know that they will be off the mortgage at some point.  The person not living in the home may not be able to qualify for another mortgage until they are off the mortgage.  Perhaps more significantly, being joint on a mortgage means that you are dependent on someone else paying the mortgage to make sure your credit doesn’t suffer.
  1. Credit Risk of Remaining on Mortgage.  If you are joint on a mortgage and the other person does not make the mortgage payment, the lender will call you looking for payment.  It does not matter to the bank that you have a judgment that says the other person is supposed to pay.  As far as the bank is concerned, you both applied for the mortgage so you are both responsible for the payment.  If you pay the mortgage for the other person the judgment typically provides that they have to reimburse you, but that provision doesn’t do you any good in the short term.
  1. Loan Assumption vs. Refinance.  Even if you can refinance, it may not be preferable to refinance.  You may have a mortgage interest rate of 4% or less, so refinancing into a higher rate is not very appealing.  If that’s the case, you should ask your lender if they have a “loan assumption” or “name deletion” process.  These processes allow you to remove someone’s name from a mortgage without making any other changes to the mortgage.  This means that if you have a great interest rate you can keep it.  Another benefit of doing a loan assumption is that the fees for an assumption are typically a lot less then for a refinance.
  1. Refinance Fees.  One thing to consider when refinancing is who is going to pay the refinance fees.  Often in a mediated divorce the clients will split the refinance fees.  The idea is that since both people benefit from getting someone’s name off the mortgage, they should both share in the cost.  If you are going to split these fees you should make sure that you are just splitting the actual fees and not any of the prepaid costs such as homeowner’s insurance or property taxes.

One benefit of going through the divorce mediation process is that the timeline and all decision-making is completely up to the clients.  For clients who can work together effectively, the divorce process can be utilized to insure that both people are able to own their own homes in the future if that is their goal.  A little bit of strategy during the divorce can go a long way to achieve a client’s interest of security, stability and home ownership.

Co-Parenting Meetings

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Do you ever want to ask your co-parent about scheduling about an upcoming trip (yours or theirs) or what time bedtime is at their house?  Ask them!  It is perfectly normal to want to make sure you have a basic understanding of the rules in the other person’s home.  It is perfectly reasonable to want to know if there is a birthday party coming up that could impact parenting time in either household.  Rather than asking your child, ask the other parent.  Your children don’t want to be put in the middle, even if the topic seems minor.  Instead, try talking to your co-parent.

Co-parenting meetings are regularly scheduled appointments for both parents to connect and talk about whatever is going on in their child’s life.  Here are a few topics that you might discuss at a co-parenting meeting:

  1. Scheduling.  Are there any activities coming up that your co-parent might want to know about?  Is there anything coming up that could impact your co-parent’s parenting time?  Is there something coming up that could impact your own parenting time such as a work trip?  Scheduling could include things like extra-curricular activities, performances, parent-teacher conferences, a child’s friend’s birthday party, etc.
  1. Big Decisions.  Do you need to make a decision about something that is coming up in the next few months?  This could include whether your child should attend public school or private school, undergo medical care or naturopathic care, or whether or not to get braces.  These are just a few examples, but really this could be any big decision that you know is coming up.
  1. Rules.  Is it important to you to have consistent bed times or dietary restrictions in your homes?  Do both of you want to have the same curfew?  Do you want to have the same rules regarding driving?  Does one parent have a concern about actions or attitudes that are going on during their parenting time?  Co-parenting meetings are a great opportunity to make sure you are both on the same page.  In fact, your co-parent might even be able to help you address challenges that are going on during your parenting time.
  1. Anything Else?  Is there anything else you are wondering about or what to discuss that is related to your child?  If it is on your mind, chances are that your co-parent is concerned about it as well.  Just talk about it.

Co-parenting meetings can be structured or they can be more informal.  There are only a few rules to co-parenting meetings:

  1. Agenda.  Each parent needs to send a proposed agenda of what they would like to discuss 24 hours prior to the meeting.  The point of sharing agendas is to give someone time to process and consider whatever you want them to think about.  You don’t want to feel put on the spot and your co-parent doesn’t want that either.
  1. Agree to Disagree.  It is possible to disagree in a respectful manner.  If there is something you disagree about and you cannot reach a resolution, take some time to think about it and schedule a follow up conversation.  Each of you should spend time thinking about a resolution to the issue that is acceptable to you and that you think will also be acceptable to the other parent.  Do not raise your voice, make personal attacks, or threaten to call your lawyer.  If you need to, consider scheduling an appointment with a mediator or child specialist.
  1. Keep It About The Kids.  Co-parenting meetings are not the time to talk about your relationship or what is going on in the other person’s life.  If someone wants to volunteer information, that’s fine.  But this is a time to discuss your kids and how they are doing.

So what’s next?  If you aren’t comfortable discussing the idea of co-parenting meetings, try emailing them a link to this page and ask them what they think.  Try scheduling three co-parenting meetings.  It may seem awkward at first, but if it does, just know it probably feels awkward for both of you!  Just remember that you are doing this for your child and so that you can have a more effective co-parenting relationship in the future.  If you don’t know what to talk about, consider using numbers 1-4 above as a template agenda.

Here are a few things to consider when you schedule your co-parenting meetings:  Do you want to have them around a parenting time transition so that your kids can see you interacting respectfully?  Do you want to avoid having these meetings around the kids so they aren’t waiting on you?  Do you want to schedule a phone meeting after kids have gone to bed?  How long do you want these meetings to last?  There are no “right” answers to these questions.  Try scheduling a meeting and seeing how it goes.  You can always make changes to future meetings.  Remember, this isn’t about the two of you – this is about your kids!