From Separation to Home Sweet Home: Navigating Your MN Divorce and Refinancing Your Home
Oct 19, 2023
Going through a divorce is hard enough, especially when faced with the array of decisions surrounding what to do with your home after your MN divorce. In this week's episode, I am joined by Tami Wollensak, a Certified Divorce Lending Professional (CDLP®). Tami gives helpful tips on how a CDLP can help you navigate creating a customized divorce settlement plan.
Here are some of the tips from our latest episode...
First, we discussed what exactly is being negotiated. It’s important that people understand that the asset they are negotiating with their spouse is really the equity in the home, not the home itself. It’s the amount of the mortgage balance. If there’s a mortgage on the home the difference between the mortgage balance and the agreed upon value, that’s the equity.
Equity can be negotiated in many different ways. Equity can be rolled into a new mortgage through refinancing, but then you’d lose the current mortgage terms such as your current interest rate. There are certain situations where banks will allow one party to assume the mortgage and keep the rate. I would chat with someone like Tami to learn if this is possible in your situation. If you do call your mortgage company on your own; make sure that you ask for the assumptions department. Sometimes you may get the wrong information from someone who doesn’t really know the answer. Other options are pulling equity from assets that are not the house, such as bank accounts, 401K’s, etc.
The second topic of discussion was parents wishing to keep the home for their children. When going through her own divorce, Tami actually felt like she wanted to keep her home. Through her own experience, she advises listeners to tread very cautiously. You need to wrap your head around what your full budget will need to look like in order to maintain the home you are trying to keep.
Not only will your monthly mortgage payments change, and probably be more than before, but you will also be taking on all of the other expenses and responsibilities that come with managing a home. Expenses such as monthly maintenance, yard maintenance, snow removal, replacing or repairing home appliances, taxes, etc.
Tami’s budget was so tight due to keeping the family home and all of these unexpected expenses she found herself feeling very stressed out about money. This stress affected her children as well. But when Tami was able to downsize, allowing her more funds to to invest in her children, everyone thrived. Her kids were able to play traveling baseball, which they loved, they were able to spend more time together as a family, and their new home created a safe and loving environment for them to grow in. By downsizing and reevaluating her budget, Tami was able to relax and do some of the lifestyle things that she wanted to do.
Tami and I created this FREE resource for listeners. It includes a maintenance checklist of things to consider when taking over the full responsibility of maintaining a home. We recommend going through this checklist to know if you are able to handle all of the potential expenses you could be facing. This will help alleviate getting surprised later in your divorce process with expenses you did not expect. Thinking through this prior to your Mediation session will help you feel prepared for the divorce process.
Thirdly, Tami shared her thoughts on divorced couples still owning their homes together. While owning a home together as a divorced couple is tricky, there are also other factors to consider. When you are married, you hold the title to the home, which is the ownership interest in the home. While you are married, there are protections in the event that something happens to your spouse. But what happens to the title if you get divorced? These are all things you should think through before deciding to own the home together after divorce.
When designing your divorce settlement, it’s important to know the details of the title ownership of your home. Know what the laws are in your state and what protections are available to you. Then, if you choose to put joint ownership in your settlement because it’s right for your family, make sure you know how to protect yourself and how to come up with a valuation once the timeline is over. All of these decisions will be determined by the divorce settlement, so it’s important to be aware of what the factors of the settlement mean and to have protections in place.
Finally, we discussed interest rates. There’s no denying that they have changed over the years. Tami’s advice is to “marry the house and date the rate.” What she means by this is that there’s no way to predict the future of the market. Interest rates will rise and fall over time depending on many variables. Make sure that when you close on your new mortgage that you are comfortable with that payment. If down the road you can refinance, great, then you can take advantage and have better cash flow. But do not agree to payments you cannot afford in the hopes of refinancing in the future.
Having Tami on the podcast has really helped me grow as a mediator. If you are going through a divorce or are considering a divorce, and have questions about keeping your home, please schedule a consultation with Tami to discuss your options. Don’t forget to use this FREE checklist to evaluate your household responsibilities and budget. Finally, schedule a free consultation on my website if you need mediation support!
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