What happens when you already have a mortgage but need to sell the home and get a new mortgage for your new home? If you were not the person who initiated the divorce or were ordered by the judge to sell your property you may want to consider the difference in your total payments over a certain period of time as a liability that needs to be incorporated into your marital estate.
Under your new financing structure (i.e. your new mortgage) you may have a higher interest rate, long term to pay off the mortgage, different level of collateral flexibility, less equity in your home, etc. These factors did not exist under your old mortgage. If they are not beneficial to you should you hold 100% of the financial burden associated to the new mortgage?
Think about this as it is all a part of your divorce process and therefore part of your negotiations in your divorce too. This should be taken into account within the value of your marital estate and within your settlement structure. How you go about doing this can be a sensitive matter as there are likely a number of moving parts that need to work hand in hand to make this work for you properly.
Has your capacity to obtain a preferred mortgage been constrained as a result of the income allocation between you and your spouse? If so, this issue needs to be taken into account in your divorce process. Although it may not be apparent on the surface, you may be financially harmed from the process which needs to be managed.
Some issues to be careful of:
- Does one mortgage financing impact another property in your portfolio?
- Did the bank decide to now cross-collateralize your primary mortgage against your other properties?
- How much collateral flexibility do you now have given the new terms and conditions imposed on you?
- How do you plan to address these new restrictions in your divorce decree?
There are so many questions you need to ask yourself to make sure you manage your wealth at risk. You will be operating under a new structure at least for the near term. Is this what you wanted to have happen? If not, you need to address this as you negotiate the outcomes of your divorce.
About the Author
Larry Smith CPA, MBA
Larry is a Founding Partner of Divorce Outcomes, a specialty professional services firm that analyzes, architects and negotiates all of the financial aspects of a divorce.
Since 2003, Larry has worked with divorcing parties as their fiduciary to design sophisticated divorcing strategies that enable clients to preserve and create wealth from their divorce. As a technical financial expert, he uncovers hidden tradable components through various analytical and architectural processes to arrive at desired outcomes. He is an alumni of KPMG and Andersen and has expertise in:
- technical accounting, taxation, business consulting, risk management, M&A
- forensic analysis, performance analytics
- M&A, business valuations, divorce management, family equity transfers, multi-party negotiations, communications management
- advanced process engineering, cognitive performance technologies
If You Have a Question
If you have a question, feel free to contact me at [email protected] or 617-680-5222. The call is free. I will spend 30–60 minutes with you. I will provide you an honest assessment as to where I think you are positioned in your divorce process or answer any questions you have. I may provide you some guidance, insight or advice that you can take with you as you wish. There is no obligation to move forward. The phone call is designed to ease your fears, provide you some options to pursue and a potential road to run on that can lead you down a path to achieve a successful outcome.
About Divorce Outcomes
Divorce Outcomes is a specialty services firm that helps people both domestically and internationally manage all of the financial decisions that arise in a divorce process. We are not attorneys. We are financial experts who partner with our clients as their personal financial advocates. We help our clients:
- manage their divorce process
- uncover hidden financial risks
- architect divorce solutions
- manage ever-changing negotiating positions
- communicate complex financial matters
- close the divorce process as soon as possible
Throughout the process we evaluate our clients’ current wealth-at-risk and architect desired outcomes to best preserve or create wealth.
This communication is for general informational purposes only which may or may not reflect the most current developments. It is not intended to constitute formal advice or a recommended course of action as every person’s situation is unique and different. The information here is not intended to be, and should not be, relied upon by the recipient to make a decision without professional guidance.