Getting a Mortgage After Divorce or Separation
Did you recently go through a divorce or separation? Was your credit affected by late payments on joint accounts or credit cards?
If you have you been turned away by big banks and other traditional lenders after your credit was damaged during a divorce, then you’re not alone — and we’re here to help.
Many individuals suffer from poor credit ratings after a divorce or separation, as a result of missed or late payments. While it can be frustrating to experience this situation, most people don’t realize that a variety of mortgage options exist through Alt-A and B lenders to support you.
At Main Street Mortgage, our team helps homeowners, whose credit ratings were bruised by a divorce or separation, secure a new mortgage. We understand that your credit score doesn’t always fairly reflect you.
Find out how we can help with a mortgage after a divorce.
Mortgage Programs for Divorce & Separation
If you have a joint mortgage with your former spouse, this will be something that you will want to address after your divorce or separation. Overall, there are five main options for joint mortgages:
- Sell the Property
- Rent the Property
- Mortgage Assumption
- Mortgage Refinancing
- Stay with the Mortgage
For more information about these options, click here to read our blog about mortgages after divorce or separation.
At Main Street, our mortgage experts are familiar with programs for mortgage assumption or refinancing and can walk you through your options. Our team will help you decide which is the best option for your specific situation.
Mortgage Assumption After Divorce
A mortgage assumption is the result of one partner taking responsibility for the entire mortgage after a divorce and releasing the other person from their commitment. Both parties must agree to a mortgage assumption in advance.
The benefit of this arrangement is that you are no longer reliant on your partner, so you will not be affected if they miss mortgage payments.
To assume a mortgage loan, you will need to be able to prove to your lender that you have enough income to make monthly payments. Unless you were the only income earner in your marriage, this can be challenging for a single person.
You will also need to settle up with your partner, without using the home’s equity. For this reason, mortgage assumptions are less common when one party decides to keep the mortgage.
Mortgage Refinancing After Divorce
When one partner decides that they want to keep the home and assume the mortgage by themselves, the most common option is mortgage refinancing.
To qualify for refinancing, there needs to be enough equity in the home to settle up with the other party, and your spouse must be willing part with the home. You must also have enough credit and income to qualify for a new mortgage. If these conditions are met, then you will be able to buy your partner out of their share of the home and assume the mortgage yourself.
Similar to a mortgage assumption, this option puts the control of your mortgage back in your own hands. You are no longer dependent on your partner to make payments. That said, this can be challenging for a single partner in a two-income household.
Tips for Getting a New Mortgage After Your Divorce
It can be tough to know how to handle your finances when you are going through a divorce or separation. If your credit was damaged in the separation process, or if you’re struggling to stay on budget with a single income, here are a few quick tips from our team:
- Close joint accounts and open new ones. If your former spouse opened accounts in your name, it is important to close them so you are not held accountable for their missed payments. Closing an account will register as a hit to your credit rating, which is why it’s also important to open new ones immediately afterward.
- Cancel joint credit cards and apply for 1 or 2 new ones. The same logic that applies to bank accounts will also apply to credit cards. When applying for new cards, make sure that you do not apply for more than 1 or 2. Credit cards are a great way to rebuild credit, but too many applications can be a warning flag to lenders.
- Pay your bills on time — while prioritizing credit cards and debt payments. It can be tricky to juggle financial commitments after a divorce, if you are used to having two incomes to support your lifestyle. Prioritize credit card payments and debt payments for mortgages and car loans. Rent, cell phone bills, and utility bills are also important, but they will not affect your credit score as severely if your payment is late.
- Speak to a financial specialist to help balance the books. If you find yourself having difficulty paying the bills after a divorce, we recommend speaking with your mortgage agent or another financial specialist. They will be able to provide advice about refinancing your mortgage or finding other ways to balance your books, based on your specific situation.