Last time, I told you about some of the pitfalls that Raleigh area home owners encounter when facing divorce.
Today, I’m going to tell you about the best way to avoid those pitfalls: An Action Plan
Here’s Your Step By Step Divorce Action Plan
If you follow these suggestions, you can avoid having a painful situation like divorce turn into a tragic situation for you as a home owner:
Step one: Check to see whose name is on the mortgage? Is the mortgage held jointly or individually? If individually, a quick claim deed may be a quick solution. However, North Carolina is a marital state so even if you owned the house individually before marriage, you own it jointly now. Each spouse will have to agree to ownership and division unless you married with a prenuptial that excluded your pre-marriage home.
Step two: If you have a mortgage on the marital home you need to contact your bank to request a mortgage pay off. A payoff is different than the mortgage balance you see monthly on your payment statement. The payoff includes the interest in arrears, which is a banking term that simply means you owe more money that then monthly statement shows. Knowing how much you truly owe to be released from the monthly debt obligation is key in determining your options. If you owe less than you will be able to sell your home for then you have what we call, equity. With equity in the property that will allow you to either sell and divide the profit or buy each other out?
Step three: Call Linda Craft & Team, Realtors to schedule a free consultation to discuss all your options. During the consultation we will provide a realistic market analysis so you will know the range of value to expect in a sale. With your mortgage payoff in hand we will be able to provide an estimate of selling cost and estimate of your net proceeds from the sale including any division of your escrow account where your yearly tax and home owners insurance is held. Lastly, we will help you estimate preparation cost for entering your house onto the market for sale, repair cost that a buyer may request from a home inspection and carrying cost for the time on market plus escrow period. These are all expenses that affect your profit and have to be considered and included in your budget. (Escrow is the time between a contract to purchase and deed transfer where you no longer own the property of have the financial burden of mortgage payment, taxes, insurance, utilities and lawn maintenance.)
Step four: Make a decision which option is best for you. With equity couples have several options. With a full estimate of cost associated in a sale they can now decide if they want to sell the house and split the proceeds and each move to their new single lives free of this joint debt or further joint obligation. Or they could decide to buy each other out with a cash out refinance. The buyout option places the mortgage into one name along with a new deed to release the other from joint ownership and debt obligation. We would refer you back to your present lender to see if they would be willing to remove the other spouse from the deed of trust (mortgage obligation in case of foreclosure). In most cases they will not allow this. The only way to separate the financial obligation permanently is a sale or a total refinance which has charges to recreate a new mortgage. The questions that remain to be answered with a buyout scenario is; can the one person who wishes to keep the house qualify for the new mortgage on their own, and is there enough equity in the house to be approved for a refinance. In order for a mortgage company to approve a refinance most will require a minimum of 5% down payment and don’t forget to calculate and negotiate the finance charges associated with the refinance. A Good Faith Estimate from your lender will provide this information and we are very happy to refer you to a great local lender to help you.
Next Time, We Answer Your Difficult Divorce Questions
Check back here next time when we answer difficult divorce questions that impact your real estate investment.
In the meantime, if you would like to talk with us about your specific situation, please don’t hesitate to contact us at Linda Craft & Team.
We are here to help you as a Raleigh area home owner who is facing one of the most difficult life milestones there is. And we’ll work hard to make sure that the process and the transition is as painless as possible.
Until next time,