One problem that I’m coming up against with greater frequency as I meet more people sorting out their divorces, is people who feel they “Can’t Afford” to get divorced. In a divorce, most people think about splitting the assets “getting half” or think about child custody etc. What do you do when you bought a home together a few years ago with no money down? The reality is that many families are “upside down” on their real estate. Meaning they owe more than its worth. In this situation, a divorcing couple would basically have to “split the pain” or split the cost of satisfying your mortgage, realtor fees, and tax obligations on this. If you owe more than the market will give you, your main option will be a “short sale” … This is when your realtor negotiates with your mortgage holder to allow you to sell the house for what its worth, and the bank will simply take a loss. It is becoming a more common practice, and while the process can be grueling the results for the family are the best The biggest downside would be that the short sale or “settlement” with the mortgagor would adversely impact your credit.
As mortgage qualifying becomes more and more cumbersome. Divesting real estate assets in a divorce can sometimes be very tricky, and in some cases impossible. Something to consider for couples who have at least one person over the age of 62 in a divorce is a reverse mortgage. The beauty of a reverse mortgage is that there are no credit, employment, or income requirements. The only thing needed is home equity and an owner occupant with a minimum age of 62 years. The house can actually be in a distressed or pre-foreclosure status and still qualify. If there are existing liens against the property that is not a deal breaker either. The needed equity must be present however. Generally speaking, the younger the occupant is, the more equity there will be required. Continue Reading – Consider the Reverse Mortgage
When a couple gets divorced, there can be many financial complications surrounding the dividing of any assets, or any marital debts. I started developing this practice of “divorce planning” after having many of my mortgage clients come to me a year or so after a divorce, and just getting stuck in the financing process due to credit issues. Many of these issues we’re easily preventable, but in the heat of the divorce transition they were things that just fell by the wayside. Perhaps they didn’t refinance one party off the old mortgage, or any joint credit for that matter, and the other party falls behind on payments. This negatively effects ALL parties connected to the debt. Continue Reading – Mortgages, Credit and Divorce
One of the most common challenges I see in the Family Law practices I serve is attorneys having trouble collecting their fees in a timely manner. Historically many attorneys get paid when the marital residence is sold or refinanced. But these days a refinance is much harder to come by in a divorce situation, and for similar reasons, a house is taking a lot longer to sell than it used to.
I have developed a selling strategy that can significantly improve the speed at which a marital residence can be sold. I call it the “seller buy-down strategy.” Continue Reading – The “Seller Buy-Down Strategy”
Part of every divorce planning conversation that I have, is “do you have a will”? Most people don’t. But they are SO simple, and SO critical. Anytime a family is in a divorce situation, is a perfect time to check in with what you have in place. Most people who do have wills, would be well served to have that reviewed, and see if the divorce changes any of the directions laid therein. And if you don’t have a will, this is also a great time to get organized with one. Continue Reading – The Importance of a Living Will
The CRADLE is a term we use in Divorce Planning that refers to one’s Credit, Assets, Dependents, Life, and Estate. These are the 5 main components to take into consideration when making financial decisions around a divorce.
The first action I take when starting a Divorce plan is pulling a credit report. A huge value that I can provide is in regard to advising towards protecting your credit. A divorce is a dangerous time for your credit report, even if the cash flow is good. Bills can just find a way to get forgotten, when your mind is on other heavier things. I will help you create a plan to separate and clarify joint credit and make sure that the divorce is NOT the reason why your credit might not be perfect.
A recent article in the NY Times last week does a great job of walking readers through the thought process of which debts you should pay off first. More importantly, it reaffirms much of what I teach in the Transitions Divorce Planning Program … prioritize your CASH-FLOW.
As money comes in, it is incredibly valuable to learn and follow our simple model for prioritizing where your money goes. Here is very simple Cash Flow Priority Model:
- Build Your Cash-Cushion (i.e. Emergency Fund)…ideally 3-6 months of living expenses
- Pay off your consumer debt (credit cards, auto loans, student loans, etc.)
- Build your “liquidity” and fund your future…meaning save and invest
- Pay off your mortgage
Continue Reading – Prioritize Your Debts… and Pay Your Mortgage Last?
As T. Harve Ecker explains, “if your subconscious ‘financial blueprint’ is not set for success, nothing you learn, nothing you know, and nothing you do will make much of a difference.” (from “secrets of the millionaire mind”)
What is Your Money Blueprint? Put simply, it is your subconscious beliefs and feelings about money. From your earliest years as a child, you learned how to “feel” about money. Most of your money blueprint came from your parents. What are your habits and traits? How confident are you in yourself? How well do you relate to others? Do you truly believe you deserve wealth and financial abundance? Your character, beliefs, and your thinking play a critical role in your success (or lack of success). Continue Reading – After Divorce: An Opportunity to Change Your Relationship to Money
Contact me at my office (Mortgage Trust Inc) to schedule your first meeting.
James Adair: 503-282-5626 or james@pdxhomeloan.com
The fee for our initial consultation is $295.00
There are additional continuing education programs that we will look into as well.
Additionally, if it does make sense that we make a refinance loan, or a purchase mortgage of some kind. I will credit the divorce planning fee back to you at closing.
