Going through a divorce is one of the toughest things anyone can face, and when a home and a mortgage are involved, it adds another layer of complexity. As a Certified Divorce Lending Professional (CDLP), I spend a lot of time helping people in Michigan figure out their home loan options during this challenging time. It’s not just about splitting assets; it’s about making smart financial choices for your future.

Why Does Your Mortgage Matter So Much in a Michigan Divorce?

Your home is usually the biggest asset a couple owns, and the mortgage is often the biggest debt. During a divorce, the court in Michigan will decide how to divide marital property and debt fairly. This means figuring out what happens to the house and who is responsible for the mortgage payments.

Here’s why refinancing often comes into play:

1. Removing a Name from the Mortgage and Note: This is perhaps the most common reason. If one spouse is retaining the house, the departing spouse may need to be removed from the mortgage loan. Even if your divorce papers say your ex-spouse is responsible for payments, the mortgage company still holds both of you responsible until one name is officially taken off the loan. Refinancing into just one spouse’s name is usually the way to make this happen.
2. Buying Out an Ex-Spouse’s Share: If one person wants to keep the house, they often need to pay the other person for their share of the home’s equity. Refinancing is a popular way to do this. The person keeping the house gets a new, larger loan, and the extra cash is used to pay the departing spouse their share.
3. Adjusting Payments: Divorce often changes your income and expenses. Refinancing can allow the person keeping the house to adjust the loan term or interest rate to better fit their new budget.

Special Considerations for Divorcing Homeowners in Michigan:

• Your Divorce Decree is Key: The details in your final divorce decree or settlement agreement are super important. It outlines who gets the house, who is responsible for the mortgage, and any equity buyouts. Your mortgage professional will need to see these documents.
• Income Qualification: This is a big hurdle. The spouse who wants to keep the house needs to qualify for the entire new mortgage on their own income. What was affordable with two incomes might not be with one.
  • Alimony/Child Support as Income: If you receive alimony or child support, it can sometimes be used as income to qualify for a new mortgage. However, lending guidelines require you to show that you’ve been receiving these payments consistently for at least 3 to 6 months, and that they’re set to continue for at least three more years. Both the receipt and continuance timelines are based on the date of closing of the new mortgage.
  • “Hold Harmless” Agreements: Sometimes, divorce decrees will include a “hold harmless” clause, where one spouse agrees to pay the mortgage and protect the other from financial harm. This is also known as a simple assumption but be very careful here! While this is allowed legally in the divorce, it does not remove you from the mortgage obligation with the lender. If your ex-spouse misses payments, your credit will still be impacted. This is why a full refinance is usually the cleaner option.
• Credit Scores Post-Divorce: Divorce can be tough on finances. Make sure to check your credit score, as it’s a huge factor in getting approved and getting a good interest rate. If credit has been impacted, we can discuss strategies to improve it.
• Timing Matters: When you apply for a refinance in relation to your divorce timeline can affect things. Having the final divorce decree is required to close, however we can start divorce mortgage planning much earlier in the divorce process you so know your numbers and options and can make more informed decisions.

The CDLP Difference in Michigan

As a Certified Divorce Lending Professional, I have special training in how divorce affects home financing. I work closely with family law attorneys, mediators, and financial planners throughout Michigan to make sure the mortgage side of your divorce settlement works correctly. My goal is to help you avoid common mistakes, understand all your options, and make sure your mortgage plan supports your long-term financial goals after divorce.

The last thing you need during a divorce is more stress about your home. By planning carefully and getting the right mortgage advice, you can ensure your home’s equity is divided fairly and that your future housing situation is stable.

Are you navigating a divorce in Michigan and have questions about your home and mortgage? Don’t make crucial financial decisions without expert guidance. As a CDLP with 25 years of experience in Metro Detroit and across Michigan, I can provide the specialized knowledge and support you need to make informed decisions about your home’s future. Contact me today for a confidential consultation tailored to your unique divorce and mortgage needs.