Protecting credit through divorce & while selling your luxury
La Jolla real estate can be tricky. Even the divorces and breakups that start
out amicable can eventually turn sideways -- if not completely inside out --
despite well-intentioned efforts to remain civil, and can affect the status of
your luxury La Jolla Real Estate. Regardless of who was wronged, who was
innocent, how the blame is divided, or whether the union simply drifted apart,
it's a death of a relationship, a time to mourn. It's also a time of rebirth
and a new life, a life that includes protecting your luxury La Jolla Real
Estate.
So, don't get sidetracked. Although your "better
half" may be out of the picture, your finances will follow you wherever
the future leads you. My mother used to warn her daughters by saying: "You
can always find another boyfriend, but it's damn hard to find another place to
live." Her Midwestern common-sense advice, if you're wondering, applied to
my brother as well.
Steps You Can Take to Protect Your Credit
First, Obtain Your Credit Report. You can get a copy of your
credit report by notifying each of the three credit bureaus, Experian, TransUnion or Equifax, or you can obtain a free
copy of each report online.
Second, Inventory Credit. Make a list of all creditors,
secured and unsecured.
Secured creditors are those that attach an asset as security
for the debt. If your home is mortgaged or you have a loan on your car, for
example, your home and car are assets used as security.
Unsecured creditors are those that lend you money based
solely on your promise for repayment.
Third, Separate Joint Accounts From Individual Accounts.
Joint accounts are those containing both names, and each of you is responsible
for the debt. Individual accounts are those opened solely in your name.
Fourth, Call Joint Credit Card Lenders. Find out if the
credit extended is based on your credit or your partner's credit.
If the credit is based on your credit, but your partner has
a card, ask to have your partner removed.
If the credit is based on your partner's credit, put the
credit card in your pocket. OK, just joking. Ask to have your name removed.
If the lender refuses to remove a name from the account,
close the account and open a new account.
If you have a balance on your credit card, the creditor will
not close the account unless you pay off the balance. But you can prevent
further charges on the account by asking for the account to be frozen.
Fifth, Sell or Refinance Secured Assets. It is important to
separate the liability for secured assets.
If a car is financed in both names, regardless of whose name
is on the title, both of you are responsible for the loan.
If a mortgage is held in both names, regardless of whose
name is on the deed, both of you are responsible for the mortgage.
Even if your divorce decree assigns possession of those
assets to one party, or if one of you voluntarily transfers title to the other,
the liability for the loan will remain if you do not sell or refinance the
asset.
Refinancing Your House
Should you reach an agreement whereby one person will remain
in possession of the home, then the prudent course of action is to remove the
existing loan and replace it with a new loan, providing, of course, that you
lack the capital to pay off the loan in cash.
Record a New Deed. Ask your lawyer or title company to draw
up a deed that transfers title from one person to the other. Commonly used
deeds for this purpose are quitclaim
deeds, but your lawyer may prefer to use a warranty
deed or a grant deed.
Obtain a New Mortgage. Places to get a
mortgage include your local bank, a credit union or through a trusted
mortgage broker.
If you cannot qualify by yourself, you can either sell the
property or obtain a co-signer such as asking a relative to help you qualify.
Should you owe your partner equity, ask your partner if he
or she would be willing to let you obtain a large enough loan to pay off the
existing loan and then carry a second mortgage for the amount owed. This way
you can make payments to your partner for the equity, perhaps at a lower
interest rate and better terms than a lender would give you.
Moreover, providing there is enough equity in the home to
support a second mortgage -- preferably the amount of both loans do not exceed
80% of the home's market value -- your partner might be able to sell the
mortgage at a discount to obtain the cash.
Bear in mind that obtaining a new loan will require an appraisal
to substantiate value, but since lenders have a vested interested in making you
a loan, you might want to also ask a trusted real estate agent to pull
comparable sales for you as well. Appraisals are not written in gold. You do
not want to pay your partner more for the property than it is worth, and
refinance appraisals often result in higher values than you might get upon
resale.
A new mortgage will also require a new title
policy. Although you will be insuring the lender and not yourself, this
process will give you relative assurance that your partner has not further encumbered
the property without your knowledge.
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