A common question we get lately surrounds obtaining mortgage financing at the time of separation. Once you have decided to agree to disagree and move on with your respective lives its time to get into action. The house is put on the market and sale proceeds are divided according to a previously arranged formula. Easy – right?
What if someone wants or needs to stay? Kids need to remain in a school district? A work at home spouse needs to remain in place due to an existing clientele? Mobility or accessibility issues or just plain love the house and want to stay?
Mortgage financing is available (on approved credit and following available guidelines & programs, a discussion for another time) to assist you in staying put as well as to the other partner moving out. Previously a common requirement was a “Separation Agreement”.
Have you considered a “Memorandum of Understanding” instead?
I’m not here to discuss the differences or pros and cons of a Memorandum of Understanding (MOU) vs a Separation Agreement nor are we offering a legal opinion. We have however had many good experiences with mortgage lenders when it comes to using a MOU.
This simple document provides the basis of ongoing financial responsibilities and division of property … who is paying what to whom and for how long … who gets the house and how is the other spouse compensated for their part? These issues and more are addressed in the way a mortgage lender can understand.
If your bank says “NO” then we have a couple of suggestions for you. Let’s begin with its time to review your relationship with your bank! Under most circumstances there is no reason a lender would require a court ordered/approved separation agreement. It may well be a wonderful document but comes with additional costs that many people can not afford. Further, you’d dislike losing the opportunity to move forwards – rates could go up, a great house on the market won’t wait for you, etc – because you were forced to wait to go through the same process in order to get the other document.
Talk to a mediator and then talk to an independent, licensed mortgage broker about your options.
Thanks to Author Marshall Spencer of Prime Rates for this information.