As you go through divorce, you may end up needing to purchase a new home, particularly if your soon to be ex-spouse gets your house as part of the settlement. For most people, a new house will mean a new mortgage.
If this is you, there are a few things you will want to take care of first to give yourself the best chance at getting a mortgage after your divorce. We will look at a few oft-forgotten facts to help you secure a new home. (For more, see: Get Through Divorce With Your Finances Intact.)
1. Don't Forget to Pay Current Mortgage, Even While You're Separated
Even if you moved out of a jointly-owned home during your separation, if your name is on the mortgage, you are still responsible for the payments. You may want to ensure that your spouse is keeping track of the bills to avoid damaging your own credit.
If your spouse refuses to make payments on the mortgage, your credit score can be significantly lowered. The result could be a much higher interest rate on your new mortgage, which will cost you thousands over the lifespan of the loan.
2. Remove Your Name from Existing Mortgage
Your settlement and divorce decree may declare that you are no longer responsible for your marital mortgage, but that does not mean you have been removed from the mortgage. Removing your name is not as simple as telling the bank you would like to be taken off, even if a judge declares you free and clear. To officially separate yourself from it, your spouse may need to refinance the home or file an application to know the loan is solely under his or her name.
Until those two items are taken care of, the mortgage payments are still directly linked back to your own credit no matter what your divorce decree states. Consider adding a provision in your settlement - that your spouse has a certain time to accomplish one of those two options. If refinancing the home or assuming the loan is not an option, the home must be sold to rid you of all the requisite financial obligations.
3. Finalize Your Divorce Before Purchasing a New Home
As with all major life changes, your divorce will significantly affect your financial status. Even with adequate preparation (in terms of creating a budget and lifestyle analysis) your finances will still need to stabilize.
Consider holding off on applying for a new mortgage until you have had time to adjust to a newly single income, child support payments and alimony payments. Once your finances are settled and you have a better idea of what your monthly expenses will allow you to spend, then begin searching for a new home.
Purchasing a new home immediately after your divorce is final can be tempting, but do not forget to take care of these three items first. By making financially-wise decisions with your current mortgage, you are setting yourself up for success when the time comes to get a new mortgage and move into your new home. (For more from this author, see: (For more from this author, see: 5 Financial Steps You Need to Take Before Divorce.)