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Division of property can be influenced by mortgage rules

Sunday, October 22, 2017

Obviously, splitting assets can be a contentious part of the divorce process. Texas residents can attest that the division of property is one of the most complicated parts of any separation agreement, and this is doubly so in the case of couples who do not own large assets like their home outright. The terms of a mortgage note can play a major role in how couples divide their home.

Generally speaking, how an asset like a home is split can be left up to the couple -- if, for example, one individual wants to stay in the joint home and the other wants out. This can be arranged by having one person "buy" the other out of an existing mortgage or of their "half" of the owned property. This becomes more complicated, however, if refinancing a mortgage becomes an issue.

Lender guidelines generally provide that individuals cannot access more than 80 percent of the value of the home, regardless of the refinancing circumstances, which means one party may "owe" the other if an equity split isn't feasible. Historically, in these cases, the only option would be to sell the home in order to split the asset. However, new rules falling under so-called "divorce mortgage" means one individual is able to "sell" the home to the other qualified party, obtaining mortgage financing valued at up to 95 percent of the total value of the home. It is important to note that not every state deals with these rules the same way, so couples can benefit from learning more before moving forward.

A home, like a marriage, is an investment, and when a marriage ends, division of property becomes extremely important to both individuals. Texas residents faced with the prospect of dividing an asset like a home might have more options available to them than they realize. Learning about these options ahead of time can help both parties reach an agreeable solution.

Source: burnsidenews.com, "Divorce and the mortgage world", Audrey Wambolt, Aug. 7, 2014

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