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Creative Solutions with Your Mortgage

admin — Fri, 02 Oct 2009 12:00:37 +0000

Let’s say your home is worth $100,000.00 and there is an $80,000.00 mortgage on the home, leaving $20,000.00 in equity. You and your spouse have agreed to divide your assets 50/50 and you are going to keep the house, but you are unable to pay your spouse for his or her $10,000.00 interest in the home. You agree to execute a mortgage in favor of your spouse that you will pay in a lump sum in 10 years. This mortgage will be documented by your attorney, who will draft the proper papers, and record them on the land records.

If, however, the housing market falls and your house is suddenly worth $70,000.00 when it comes time to pay this $10,000.00 mortgage, you must pay your spouse the $10,000 from the divorce agreement even though the value of the house is less than it was at the time of your divorce. This is also true even though the amount that you owe on the mortgages ($80,000 on the first mortgage and $10,000 on your spouse’s mortgage) may even be more than what you can expect to get for the house in the event you sell it. This is a risk that you take by not paying your spouse or dividing the asset immediately. Generally, real estate markets go up, but that isn’t always the case.

A creative way of dividing the equity in the house is for spouses to record a notice of equitable interest against the land records, which gives the spouse relinquishing his or her ownership interest in the house a right to a certain percentage of the equity in the house when it is sold. So, if you agreed that the house would be sold in 10 years and that each spouse would receive 50% of the equity, if the house was worth $70,000.00 in 10 years and the mortgage owed was still $70,000.00 in the example above, then your spouse would not receive any money, and you would not have to pay your spouse more than your house is worth at the time that the equitable interest becomes due.

Yet, if in the future the house is worth $300,000.00, and the mortgage has been reduced to $70,000.00, then your spouse would be entitled to share in one half of the $230,000.00 profit, even though he or she hasn’t been cutting the lawn or making the mortgage payments.

Sometimes, in these circumstances, the spouse remaining in the house accrues a certain amount of credit for the fact that he or she has performed the maintenance and paid down the balance on the principal owed on the mortgage over time. You may also wish to make provisions with respect to repairs and maintenance on the house, having you and your spouse share expenses for big ticket items such as the furnace, water heater and roof. If both spouses are to share in the appreciation of the house (or depreciation), they could both share in the maintenance costs.

These kinds of situations can get sticky emotionally and are not as straightforward as simply refinancing or selling the house at the time of the divorce, but they may represent a creative solution that will help you settle your case. For more information on the financial aspects of divorce, see http://www.peace-talks.com/finformation.php. Also visit the Peace Talks resource center at http://www.peace-talks.com/resources.php.

Excerpted from Your Divorce Advisor: A Lawyer and a Psychologist Guide You Through the Legal and Emotional Landscape of Divorce (Simon & Schuster/Fireside 2001). For more information: http://www.yourdivorceadvisor.com/.

For more information contact Peace Talks www.peace-talks.com

Executing the Mortgage in Favor of Your Spouse

admin — Tue, 29 Sep 2009 12:00:35 +0000

If you are not in a position to refinance the house or pay your spouse immediately, and there are not enough assets to offset your spouse’s interest in the home, you might consider giving your spouse a mortgage on the home, or securing your spouse’s interest in the home using an equitable interest notice.

If you have determined what the spouse will be paid for his or her interest in the home, and the terms of the agreement, your lawyer can prepare a mortgage document to secure the spouse’s interest in the home in the land records. That way, even if you die, your spouse’s interest is protected.

A negotiating point will be whether or not the mortgage secured against the home will bear interest. Sometimes, it makes financial sense to pay your spouse interest on the mortgage which can accumulate if he or she has to wait a long period of time for the money rather than having to immediately sell or refinance the house. Understand, however, that even if the house value falls, you will still owe the amount of money set forth in the mortgage.

For example, let’s say your home is worth $100,000.00 and there is an $80,000.00 mortgage on the home, leaving $20,000.00 in equity. You and your spouse have agreed to divide your assets 50/50 and you are going to keep the house, but you are unable to pay your spouse for his or her $10,000.00 interest in the home. You agree to execute a mortgage in favor of your spouse that you will pay in a lump sum in 10 years. This mortgage will be documented by your attorney, who will draft the proper papers, and record them on the land records.

The next question is whether this mortgage will bear interest for your spouse. Your spouse is waiting ten years to get $10,000.00. If she or he forced you to sell the house, he or she would get money immediately. Having to wait for the money may mean that your spouse is not able to buy another house or condominium immediately and has to make certain sacrifices. In such situations, having the mortgage pay interest is a desirable option.

If the market goes up, and in 10 years the $100,000 house is now worth $200,000, you are still obligated only to pay the $10,000 (plus interest, if negotiated) agreed upon in the original divorce agreement. Your spouse then gets $10,000 (plus interest, if negotiated) and you keep the $190,000 value (less any outstanding mortgages) of the house. If the value of the house skyrockets to $300,000.00, you would get to keep all of the extra equity by virtue of the house’s appreciation, and you would only owe your spouse $10,000.00. For more information on the financial aspects of divorce, see http://www.peace-talks.com/finformation.php. Also visit the Peace Talks resource center at

http://www.peace-talks.com/resources.php.

For more information contact Peace Talks www.peace-talks.com

Timing of the Sale of Your House

admin — Thu, 24 Sep 2009 12:00:06 +0000

Evaluate your circumstances to determine when and how the equity in the house is best split, and whether that must be accomplished by a sale, or a refinance or buy-out between spouses. Sometimes it can be done immediately, and in other situations a delay is preferable.

If one spouse wishes to keep the house, and there is a way to divide the equity and offset it against other assets, or refinance the house so that the spouse giving up the house is paid his or her share of the house as soon as possible, then the spouse retaining the house would be under no obligation to sell the house subsequently. This is the cleanest way to handle this situation.

However, you may not be in the economic position to split your home equity in this manner, or may be ineligible or unable to afford a refinance. Therefore the timing of how a spouse is paid his or her share of the house equity becomes a central issue.

If the division of equity will not happen immediately, there may be an obvious dividing point, such as when the children graduate from high school or college, the remarriage of the spouse retaining the house, whenever that spouse begins to live with someone under circumstances tantamount to remarriage, or any other life event that you determine in advance. Generally, when the first of these events occurs, the spouse who gave up ownership of the house or right to occupy the house needs to be paid his or her equity, either through a refinance or a sale. Sometimes, the spouse to whom payment is owed is given an opportunity to buy the house if the spouse who retained the house wishes to sell it at that time. If you want help in considering all of your options, consider meeting with a divorce financial planner, see https://www.institutedfa.com/ReferralSearchPage.aspx. Also, be sure to see the Peace Talks resource center at http://www.peace-talks.com/resources.php.

For more information contact Peace Talks www.peace-talks.com

Arrangements for the Sale of Your Home

admin — Tue, 22 Sep 2009 12:00:02 +0000

If you intend to sell your house, contact a neutral real estate agent who can give you trustworthy advice about preparing the property for a quick sale. Ask the realtor to tell you the minimum number of repairs and maintenance items needed to make the house easier to sell. Keep track of your expenses for the fix up, and keep track of who does all of the work. Don’t do anything fancy or major to the house unless it is absolutely necessary, or unless you and your spouse unequivocally agree that the improvement will be financially worthwhile. For example, painting the hallway is inexpensive and easy to do on your own, and if it will help your house sell faster, do it. If you and your spouse can cooperate in this effort, then do it together. If you can’t cooperate in doing this together, see if you can arrange to divide the tasks so that each of you can work on the house separately.

Even if your spouse won’t participate, such tasks still need to be accomplished. Perhaps you and your spouse can agree on hiring a painting company or maintenance service person to do the work for you, and splitting the cost. Even if you have to do all of the work yourself, do it. A speedy sale for a higher price benefits both of you. It is silly to let a home deteriorate, or let a sale slip through your hands by refusing to fix a roof, because your spouse won’t help pay. Keep a list of everything you do, so that if your case needs to be tried you can tell the judge about it later, but try to remain practical and pragmatic for now. Continue to work towards a solution rather than create an impasse, irrespective of your spouse’s behavior. Don’t lose sight of the benefit you will bring to yourself by putting up with some inconvenience in the short term. For some information on how to sell your house quickly, see http://www.ourfamilyplace.com/homeseller/prepare.html. Also see, “How to Sell Your House Quickly in Any Market, http://ezinearticles.com/?How-to-Sell-Your-House-Quickly-in-Any-Market!&id=1750273.

For more information contact Peace Talks www.peace-talks.com

Negotiations Once the Value of the House is Set

admin — Fri, 18 Sep 2009 12:00:27 +0000

Negotiating once the value of the house is set is a process that demands creativity and flexibility. Determine your priorities in advance of the negotiating process. In settling your case, you and your spouse can develop a plan that works for both of you. Generally, judges will approve any agreement which is basically fair to both parties. That means that you can be as creative as you wish with respect to the timing and provisions for the sale of the house and division of the equity.

Reasons To Sell

cannot afford mortgage payments
too much upkeep
too much money tied up in equity
too many memories
money owed to others (such as family loan for down payment) makes refinance or buy out impossible

Reasons Not To Sell

stability for yourself and children
ability to refinance or buy out spouse
sufficient diversity of assets, i.e., in addition to house equity you also have kept some liquid assets for emergencies and/or sufficient retirement funds given your age and employment
ability to maintain house
ability to make mortgage payments
tax considerations (deductibility of mortgage payments and capital gains)

If You Decide Not to Sell: Joint Versus Sole Ownership

You and your spouse have two choices concerning the ownership of the house. You can continue to own the home jointly, or one of you can own it in one sole name. Although joint ownership may continue after a divorce, in practice this is sometimes inconvenient. It keeps one spouse from mortgaging or selling the property without the other spouse knowing, but it also can create friction between divorced spouses who may have different priorities with respect to the upkeep and maintenance of the home.

If one spouse retains ownership, that spouse is entitled to make all decisions concerning the property, free from any interference from the other spouse. While this may not seem like a benefit initially, five, ten or fifteen years later the benefit of having autonomy with respect to the home ownership becomes more tangible.

Ownership of the house is different, or can be different, than the responsibility for paying the mortgage. If both you and your spouse have signed the bank papers to be responsible for the mortgage, merely signing the title of the house over to one spouse does not relieve the other spouse of his or her responsibility to continue paying the mortgage. Refinancing the home mortgage in the sole name of the spouse keeping the house is the safest way to protect the spouse who won’t be occupying the home. If refinancing is impossible or impractical, your lawyer can help you build language into the agreement to protect the spouse who has relinquished his or her interest in the house from having to pay the mortgage. For some excellent resources on dividing the marital home in divorce, see http://www.womansdivorce.com/marital-home-and-divorce.html. Also see the Peace Talks resource center at http://www.peace-talks.com/resources.php.

For more information contact Peace Talks www.peace-talks.com

Determining the Value of the House

admin — Mon, 14 Sep 2009 12:00:57 +0000

Determining the value of your house may help you make the decision about whether or not to sell. Determining its essential value is easy if the house is on the market for sale, and a willing buyer offers a price that both you and your spouse feel is fair. The ultimate value of your house is what someone is willing to pay you to buy it. At the closing, the mortgage and any liens are paid off, you pay the realtor’s fees, and the leftover money is the net equity. That’s the amount you and your spouse divide.

If you are not going to sell your house, or you are uncertain, you can have it professionally appraised. Since the 1980s real estate boom and crash, few people have a realistic idea of what their home is worth. Their sentimental attachments interfere with their ability to accurately assess its value.

Real estate agents may offer to appraise your home for free, but beware. These same agents may realize that you are divorcing, and may want the listing on the house in the event that it’s sold. In order to entice you to do that, they may artificially inflate the value of the home, in an effort to woo you into listing the property with them.

How to select an appraiser with your spouse

If possible, select an appraiser with your spouse. Ask for a referral from a trusted real estate agent, friend who has recently sold or purchased a house, or your lawyer. If you each know an appraiser but cannot agree on which appraiser to use, you may ask your appraisers to make a recommendation. If you can agree on an appraiser, you can split the cost, which poses an obvious advantage. By choosing one appraiser, rather than each hiring your own, you avoid “dueling appraisers” who testify against each other at a trial, a time-consuming and expensive approach.

If you cannot agree on one appraiser, and each hire your own, choosing a respected appraiser who assigns a fair value to your home is generally the best strategy. If your case proceeds to trial, you’ll need an appraiser who is respected in the professional community and who has experience testifying in court. An unscrupulous appraiser who assigns a disproportionately high or low appraisal value to your home to please you may not be able to justify that value in court. Judges do not take kindly to parties who try to unduly bias the Court in their favor. Such shading of the truth then undermines your case.

Once you have a fair appraisal, you can then work with the value of your home in further dividing your assets. For some terrific resources about selling when getting a divorce, see http://homebuying.about.com/od/sellingahouse/qt/0307DivorceHome.htm. Also see the Peace Talks divorce resource center at http://www.peace-talks.com/resources.php.

For more information contact Peace Talks www.peace-talks.com

Sell or Keep the House?

admin — Thu, 10 Sep 2009 12:00:04 +0000

One of your first big decisions in your divorce is whether or not you can afford your house or apartment after the other spouse moves out, and if so, whether you want to continue to live there. The last thing that you and your spouse need is an unmanageable property that neither of you can afford. By the same token, don’t make any rash decisions. You can always give up an apartment or sell a house later, but you probably won’t be able to re-rent the same apartment or re-buy the house after you give it up.

Even if you can afford the house and want to live there, can you mow the yard and do the necessary repairs without your spouse to help? Is there too much space? Are there too many memories? Are you able to afford it, but it will take so much of your monthly income that you won’t be able to do anything besides pay the mortgage or rent and buy groceries? Is that a lifestyle you can accept? For an excellent article on whether to see your house, see http://parenting.ivillage.com/mom/structure/0,,t7f,00.html.

When Edith got divorced, she wanted the house. She and Charles had renovated it themselves over the last 10 years, and she’d personally picked out all of the details, from the paint color to the door knobs. When Charles said he was leaving, she felt the house was her only solace. It was a comfort to her, but only for a time. Within two years she realized she was rushing home from her job every day to mow the yard, wait for the washing machine repairman, and to clean. She barely had enough money left every month to go to the movies, and most of her “savings” were tied up in equity in the house. Two years ago, the house had been a comfort. Now it was a liability! She sold the house and moved to a condominium, and now has free time and money to enjoy herself.

If either you or your spouse can afford to stay in the home, and there is a sentimental reason or attachment to the home, or you want your children to stay there, you will need to begin thinking about who will be staying in the home. Once the decision about who is staying in the home is made, then the question becomes how to divide the equity in the home. For a good practical article, see http://www.divorce360.com/divorce-articles/debt-and-credit/mortgage/need-to-sell-your-house-in-divorce.aspx?artid=899.

For more information contact Peace Talks www.peace-talks.com

Dissipating Assets

admin — Tue, 08 Sep 2009 12:00:29 +0000

With respect to stocks, bonds, mutual funds and other related cash assets, refrain from spending until after the divorce. If you suspect that your spouse may dissipate assets, write a letter to your broker, bank or financial institution immediately informing them of your impending divorce, and that you will not authorize withdrawals on any accounts without both signatures verified against the original signature cards at the institution. Once you’ve initiated the divorce, seek a court order freezing the assets in all of your accounts except for day-to-day living expenses. In some states, like Connecticut, these orders are automatic upon the filing of the divorce.

You are under the court’s microscope with respect to dissipating assets. If you need to use any of your savings to pay bills, make sure there is not a court order already in place prohibiting you from doing so. If there is, and you need to use some of the frozen monies, you must first obtain the Court’s permission. If you are permitted to use your assets to pay ordinary and necessary living expenses, keep records of how the money was spent, as well as a record of why the living expenses were ordinary and necessary. If the judge perceives you as dissipating assets, you may have a real problem at subsequent court proceedings or a trial. For a good article on dissipation of assets, see http://www.divorcedex.com/divorce/Dissipation-of-Assets-321.shtml.

Don’t plan on being tricky by closing accounts and then diverting the money to an untraceable account. All a judge needs to see is a bank statement with, say, $5000 two days before you filed divorce papers, and then a $5000 withdrawal two months after, with no disclosure concerning the whereabouts of the money, to determine that you’re a money-hider. If a judge believes you’ve hidden even a small amount of money, the next question will be “how credible are the rest of this person’s representations?”

Because you are under a microscope during your divorce, keeping a paper trail of how you spend your money is important. Keep a notebook in which you record all major financial transactions, including receipt or payment of child support, medical bills for the children, any savings that you utilize or any accounts that you cash out, bank statements, credit card statements, and so forth. You aren’t necessarily going to need these records, but if you do need them, you aren’t going to want to have to dig around the bottom of a shoe box or call MasterCard in order to find them. You can always throw the paper trail away later if you do not need it. Another terrific article on dissipated marital assets appears at http://www.womansdivorce.com/dissipated-marital-assets.html.

For more information contact Peace Talks www.peace-talks.com

How do We Use Our Assets for Mutual Benefit?

admin — Thu, 03 Sep 2009 12:00:22 +0000

In a divorce situation, many people feel that their spouse will receive monies in the settlement which will be used inappropriately by that spouse. A common refrain is “he’ll just use the money on his new girlfriend, and forget all about our children” or “she is terrible with money and will waste it.” Sometimes sentiments reflect a concern that parents who once used money for a common goal may lose sight of that goal, such as saving money for a child’s college expenses. Avoid some common costly mistakes of divorce outlined in an article in MSN Money, http://articles.moneycentral.msn.com/CollegeAndFamily/SuddenlySingle/Divorcing15CostlyMistakes.aspxA constructive way to control your money in a divorce is to use that money to advance a common goal.

You may be thinking that you and your spouse no longer have common goals, but you’d be surprised at what you may be able to agree upon. One use for savings that you’re afraid your spouse will spend frivolously after the divorce is to pay off joint credit card debt. The spouse with the highest income takes the largest chance that he or she will get stuck with the lion’s share of the credit card bills, so this is a good strategy for that person to advance. Presumably, a judge will divide savings which accumulated during the marriage equally (at least somewhat equally) between the two of you. Negotiate for those savings to go toward a credit card bill for which you owe money (or upon which your signature appears as an obligor), and you’ve reduced your after-divorce expenses (no more credit card payments). You’ve also restricted the amount of money your spouse has to spend on items you don’t believe are important. Your spouse may even agree to pay off the credit card debt. This benefits both spouses unless the credit card you’re paying off includes presents and vacation expenditures for your current single life or love interest, or was clearly only used for your benefit as opposed to your family’s benefit.

Another use for creating a mutual goal is to set up trust accounts for your children’s college expenses, or a first car. Each party can be required to contribute a certain amount of assets or income into a fund which will be jointly administered. Neither party can take money out of the account without the agreement of the other. Expenses to be paid from the account are agreed upon in advance, such as “tuition, room, board and books”, or “an automobile at age 18 costing not more than $10,000″ or “travel expenses for a trip abroad after high school graduation, not to exceed $3500″. For a good article on handling child rearing expenses after divorce, see http://www.womansdivorce.com/child-rearing-expenses.html.

For more information contact Peace Talks www.peace-talks.com

Personal Property in all Jurisdictions

admin — Thu, 27 Aug 2009 12:00:10 +0000

The courts are reluctant to get involved in dividing up personal property, so if you and your spouse can do it yourselves, that is the best way to proceed. By the time you’ve argued in court about a two year old TV set and a sofa with a spot on it, you will have spent enough in lawyers’ fees to purchase both items new. Sit down with the list of your personal property and sort out the obvious items that one spouse or the other will want. The antique that came from your mother’s family home should go back to you, and his favorite recliner should go to him. Narrow your list to those items which are actually in dispute.

Once you have determined which items are in dispute, make a list of them. From here, there are several ways to proceed. One frequently used method is to flip a coin, and the winner gets to pick the first item, the loser gets to pick the second item, the winner gets to pick the third item, and so forth.

Another possibility is to assign a dollar value to the property and have an “auction”. The spouse who wants certain pieces of property the most will be willing to pay the other spouse more for them than the spouse to whom the property is less important.

The Court will be reluctant to award one spouse money in exchange for giving the other spouse most of the personal property. Despite your sentimental attachment to your furniture and personal items, unless they are antiques, oriental rugs, or paintings by famous artists, most of your items have more value to you personally than they would to someone else. A judge will be unlikely to place values on the items, and award one spouse or the other the commensurate cash value for the items.

The message is to negotiate with your spouse for any personal property that you want, and don’t expect to be paid for what you give up. Take what you feel you deserve, but don’t expect any cash in lieu of property given up unless you both agree. For a good article on dividing property without a fight, see http://www.divorcehelp.com/rr/rr09.html.

If you cannot agree upon a fair way to divide up the items in dispute, at least you have narrowed the list, hopefully to a manageable length, for your lawyer to deal with in negotiations, or for the judge to divide at the time of the trial. For more tips on divvying up everything from family silver to DVDs, see http://www.firstwivesworld.com/resources/resource-articles/divvying-everything-family-silver-dvds-during-divorce.

Emotions run high for certain possessions, and spouses sometimes use these hot buttons as an opportunity to retaliate against the other person. A good benchmark is “will this matter in 5 years?” If it will not matter, then be prepared to give it up now.

For more information contact Peace Talks www.peace-talks.com