Getting approved for a home loan (mortgage) in New Jersey entails a meticulous process that involves thorough scrutiny of credit scores, assets, debt-to-income ratios and more. If married, lenders will look at both spouses’ information to determine if they can meet their payment responsibilities (individual or collective). Similarly, upon divorce, the mortgage company will still want to be sure to get their repayment from either of you. Here are a few things that you should anticipate.
Your home and divorce laws
New Jersey follows an equitable distribution model when it comes to dividing marital property. Courts will carefully consider various factors related to the marriage, like the length of time, earning capacity and health, to determine who gets what. Given the home’s significant value, it is possible that the judge may order its sale and split the proceeds between divorcing parties. Alternatively, one spouse may opt to buy out the other’s share of the home or trade other assets for it.
Getting the house
If you wanted to keep the house and got your wish granted, you’d have to get a new mortgage on your own – refinancing. This process involves removing your ex-spouse’s name from the loan agreement and replacing it with yours. If you can afford the payments and meet your lender’s requirements, they will likely approve your application. However, bear in mind that a high asset divorce typically impacts credit scores negatively. Your new loan may come with higher interest rates or stricter terms than your current one.
Selling the house
If you are selling the house, your lender will expect you to pay off the existing mortgage with the proceeds from the sale. Or, if you can convince the buyer, they can assume the mortgage and take over the payments.
If you are unable to sell the house for a profit or break even, you may end up owing money on the mortgage after the sale. This is known as a short sale and can have negative consequences on your credit score.
The complexities of property division in a high-asset divorce require careful planning and a proper understanding of New Jersey laws that might come into play (including taxes). If things go well, you can keep the property or sell it for a profit without incurring major damage to your financial situation.