People’s homes are generally their most significant financial assets, but what happens to the marital home post-divorce? Today, we are joined by CDFA, CDLP, licensed mortgage and real estate broker, and author of Divorce House Sense Jeff Landers to discuss the three options and their associated nuances. Jeff breaks down the complications of co-owning a house post-divorce and walks us through all that needs to be considered by those who wish to keep their home.
We learn the requirements to qualify for a mortgage loan, the criteria for equity buyout, and the types of income that qualify for refinancing a mortgage. Jeff demystifies the concepts of debt-to-income ratio, pre-approval, revocable trusts, reverse mortgages, and more. In this episode, you’ll discover creative solutions for creating an income stream to qualify for a mortgage loan, and staying in the home post-divorce, if you so choose!
Key Points From This Episode:
What is Divorce at Altitude?
Ryan Kalamaya and Amy Goscha provide tips and recommendations on issues related to divorce, separation, and co-parenting in Colorado. Ryan and Amy are the founding partners of an innovative and ambitious law firm, Kalamaya | Goscha, that pushes the boundaries to discover new frontiers in family law, personal injuries, and criminal defense in Colorado.
To subscribe to Divorce at Altitude, click here and select your favorite podcast player. To subscribe to Kalamaya | Goscha's YouTube channel where many of the episodes will be posted as videos, click here. If you have additional questions or would like to speak to one of our attorneys, give us a call at 970-429-5784 or email us at firstname.lastname@example.org.
DISCLAIMER: THE COMMENTARY AND OPINIONS ON THIS PODCAST IS FOR ENTERTAINMENT AND INFORMATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PROVIDING LEGAL ADVICE. CONTACT AN ATTORNEY IN YOUR STATE OR AREA TO OBTAIN LEGAL ADVICE ON ANY OF THESE ISSUES.
Ryan Kalamaya (3s):
Hey everyone. I'm Ryan Kalamaya
Amy Goscha (6s):
And. I'm Amy Goscha.
Ryan Kalamaya (8s):
Welcome to the Divorce at Altitude A Podcast on Colorado. Family Law.
Amy Goscha (13s):
Divorce is not easy. It really sucks. Trust me I. know Besides. being an experienced divorce attorney, I'm also a Divorce client.
Ryan Kalamaya (20s):
Whether you are someone considering divorce or a fellow family law attorney, listen in for weekly tips and insight into topics related to Divorce co parenting and Separation in Colorado.
Amy Goscha (36s):
Good morning, Welcome Back to another episode of Divorce at Altitude. I'm Amy Goscha. And. I. Have to Dave Jeff Landers. How are you doing, Jeff?
Jeff Landers (45s):
I am doing great, Amy. How are you today?
Amy Goscha (47s):
Great. Yeah, Thank You so much for coming on today. We have a great and exciting topic that I think a lot of people going through Divorce, you know, have to contemplate. So today, what are we gonna be talking about? We're
Jeff Landers (58s):
Going to be talking about the marital home and basically what to do with it. Should you keep it, should you sell it? Should you continue to co-own it? Post Divorce, they're usually only those three options,
Amy Goscha (1m 12s):
Right? Yeah. So I mean those are big options to weigh and, and there's just a lot of things going on when you're going through a Divorce. So just having some of that direction I think is really helpful. And you have a very interesting background. So you've been an avid author in this area, you know, consider you an expert. Can you just give the Listeners a little bit of your background?
Jeff Landers (1m 33s):
Yeah, sure. So I am a CDFA, which is a certified Divorce financial Analyst. I'm a CDLP, which is a certified Divorce lending professional. I'm a licensed mortgage broker and real estate broker. I'm a law school dropout from way back in the Jurassic period. I have a Baum in psychology from Columbia University, which obviously when you're dealing with Divorce psychology certainly helps. In 2010, I started a company called Bedrock Divorce Advisors, which exclusively worked with women around the country going through a financially complicated Divorce.
Jeff Landers (2m 15s):
But fairly recently I started this new company, Next Act Properties, which literally just focuses on the marital home And. we provide real estate and mortgage solutions for divorcing and Divorce people. And as you mentioned, this new book that you just read is my seventh book on Divorce. And this one is specifically about the marital home and what to do with it.
Amy Goscha (2m 38s):
Yeah, I really like your books. I like how they're short chapters to the point, but really good advice. So we're gonna kind of pull apart some of those issues. So you mentioned when you have a house and you're going through Divorce, what is the framework? Where do you start from? What are the options?
Jeff Landers (2m 54s):
I guess? Again, it depends on each spouse, you know, what do they want to do. I mean in some cases, excel it, you know, it has bad memories for everyone. Let's get out. In other cases, one spouse o, often the wife, and especially if their minor children would like to keep the home. And then the third option, many times it's like, yo, we'll continue to co-own the home post Divorce, you know, maybe until the youngest child graduates from high school or something like that. I think continuing to co-own the home post Divorce is in most cases a horrible, terrible, no good idea.
Jeff Landers (3m 35s):
Amy Goscha (3m 36s):
Agree with you on that. From like a legal perspective, from a lawyer perspective, my advice to someone, I think it's very rare that I've ever had someone co-own a home.
Jeff Landers (3m 46s):
Yeah. I mean it certainly complicates things as you're, you know, putting together the Divorce settlement agreement because there's so many What if scenarios that you know, now your clients are adding to their legal expenses, their time. And again, you can't think of everything. So you know what happens if the roof needs to be replaced and it costs $30,000 and one spouse doesn't have the money? Who picks that up? I mean one of the reasons you're getting divorced is because you can't get along. Right? And now you're continuing to co-own what may very well be their largest asset. There's always going to be controversy and disagreement, and you got Divorce.
Jeff Landers (4m 27s):
One of the PURPOSES of Divorce is to untangle yourself financially from your partner, continuing to go on something that's worth hundreds of thousands of dollars or more, in my opinion, usually a terrible idea.
Amy Goscha (4m 40s):
Yeah, that just gets very complicated because there's so many what ifs, you know, when is it gonna sell? Like how do you pay for certain expenses? Just gets too complicated. you know, in my practice, I obviously represent men and women, but when I represent women who are kind of the stay-at-home parent, that is the first thing that they talk to me about is I want the kids to have stability. How can I keep the home And, I? Think that's kind of like a security piece. And that kind of comes from like our psychology backgrounds. But when you're talking to, let's just say a female client who comes into your office who says, I really wanna keep the home, what are some things that you, you talk about as far as advice to them?
Jeff Landers (5m 21s):
Well, I mean, I think the first thing to really determine is, is it feasible? Yeah, there are a lot of, and it's not exclusively women. I mean, I've had men would like to keep their home, but the vast majority are women. And like you said, Divorce is traumatic enough for the kids. The last thing you want to do is take them outta school, away from their friends and all of that. So the hope is to keep the home. But the question is, first of all, if you're going to keep the home one, you have to buy your spouse's share of the equity in the home. So what's that number I mean? If the home is worth half a million dollars and you have a $200,000 mortgage this's, $300,000 worth of equity, assuming that's split 50 50, you've gotta come up with 150,000 to buy at your spouse.
Jeff Landers (6m 9s):
Do you have that money? Will you have it post Divorce after the other assets are divided? And is it your last penny? You don't want to be house rich and cash poor. So do you have the ability, one, to pay your spouse that share? Two, even if you do, you have to qualify for the mortgage. Right Now, if you have a great job and you are working, and no problem, as you know, legally, you don't even have to disclose that you're receiving alimony or child support. But in many cases, especially if they're younger children, the wife may be out of the workforce, which means that her income may be alimony, child support, and maybe other income.
Jeff Landers (6m 51s):
And you know, I talk about in the book how to create income out of assets if it, if some of that exists. But one, if she has to refinance a two or $300,000 mortgage, can she qualify? And qualifying for a mortgage from a lender's perspective is different than what most people think. You may think, okay, I have $3,000 a month coming in from alimony and child support, but there are a number of requirements. One, from most mortgage products, you have to have received it six months prior to even applying for the mortgage. And then it has to continue for at least 36 months thereafter.
Jeff Landers (7m 34s):
Now, many times you'll have, like in the state of Florida where I'm located, the age of emancipation is 18, that's when child support stops. So even if you're getting child support and your child is 16 years old, they're gonna turn 18 in two years. You don't make that 36 month, three year requirement. That child support you're getting for that child is not gonna count towards a mortgage. Most people don't know that. And unfortunately a lot of Attorneys don't know that either. But that's important. So that's the first step to see. Okay. And And, I like to work backwards because when I'm brought in early in the Divorce process, okay, you could sort of work backwards and say, okay, if you need to refinance the mortgage, how much income do you need?
Jeff Landers (8m 25s):
And then we could structure alimony and child support and say, okay, look, I need a little bit more in alimony. So maybe instead of getting 50% of your 401k, I take 40%, but I get an extra grand a month or whatever to provide that. Now you only need to do it for three years. So you can say, look, you know, gimme another thousand dollars for the next 36 months or so and I'll take less of the 401k. So you can do that horse trading. And it's important to know upfront what we need to do. If, you know, if I'm at the end of the Divorce negotiations or the agreements already signed, then you gotta live with what you have.
Jeff Landers (9m 5s):
Yeah. If it's already a done deal, you can't, you know, change the terms.
Amy Goscha (9m 9s):
Yeah. And I think two key points that you make is that someone like you and someone who's going through a Divorce needs to have needs to be thinking at about this at the beginning. Yes. They need meeting with someone like you to figure that out. What can they qualify for? What assets there are. And the second thing is looking at maintenance, there's various ways to structure spousal maintenance. you know, like you said, you could, if you have to qualify for four years and you know, under the statute you actually qualify for eight years, but you need a bigger amount per month as me being that person's attorney, I can negotiate those things.
Jeff Landers (9m 43s):
Amy Goscha (9m 44s):
Yeah. It's important that you're, when you're hiring a Divorce attorney, that you're also looking to make sure that they're bringing in a team of people that you need, you know, such as someone like you who can look at those options.
Jeff Landers (9m 57s):
And there's so many facets of it. It's a, it's not only the alimony and child support. So if you needed to take out a larger mortgage to buy out your spouse because you don't have enough assets, there's something called an equity buyout where you could do what's called the rate term mortgage, which means you could borrow more than the 80% that's usually allowed, has a better interest rate. But one of the criteria is that the spouse who's going to keep the house and do that refinancing, has to be on title for at least 12 months. Okay? Now, in some states, like in Florida, if you're buying more primary or secondary residents as a married couple, both parties have to be on title, but that's not true in every state.
Jeff Landers (10m 41s):
So divorces often take a year or longer from beginning to end. So if that's the desire upfront, and of course you have to have, the other side has to be amenable, but if it, if you could quit claim and get them on title right from the beginning, you might make that 12 month time requirement. So those are some of the things that if you can do these things upfront, even starting temporary support, it doesn't have to be the final amount, but at least you start the clock ticking for that six months of receiving prior to applying for a mortgage.
Amy Goscha (11m 15s):
Right. And that's key, because a lot of times I think people, they just pay their bills status quo. And it's important if you're looking to keep the residents and you have to refinance to establish what that maintenance amount is.
Jeff Landers (11m 27s):
Right. And sometimes you have to, because you know, I've, I've worked with many Divorce Attorneys that say, look, he's paying the bills, don't rock the boat. Don't go for support. Let him keep paying it. Which might make sense. Again, you've gotta look at all of this in the context of Divorce. Is it, is it a contentious Divorce or are the parties amenable? you know, maybe you don't rock the boat and you'll deal with the six months at another time. But you know, And, I don't know if you have, but I've seen many instances where you have the Divorce settlement agreement saying, okay, the spouse that would like to keep the home has 90 days to refinance the mortgage, otherwise the house has to be put up for sale. Well, in most cases, 90 days is not long enough.
Jeff Landers (12m 9s):
Okay. Right. For, for conventional mortgages, you need that six months prior. So right off the bat, they're not gonna be able to do
Amy Goscha (12m 16s):
It. Right. So yeah, you have I mean a lot of times. I will put in almost in those circumstances, like a year to, right. At least. Let's talk Jeff about income. you know, I think that's a big question. What is considered Qualified income when you're looking at refinancing a mortgage?
Jeff Landers (12m 32s):
I mean if you're looking at alimony and child support, then, then the requirement for most, for an FHA mortgage, I think you only need to have received it for three months prior. But let's assume, you know, the six months prior, and when I say receive it, it means on time, the specific amount. It's not like, you know, okay, you get $2,000 one month and then 500 the next, and then 3,500. It has to be consistent and on time for the six months prior, and then it has to continue for at least 36 months thereafter. So we're talking about 42 month timeframe for it to be considered Qualified income. Now of course, you know, if you have a full-time job and you're a W2 employee and you have, you know, enough income from that, you may not even need alimony or child support.
Jeff Landers (13m 22s):
Or maybe you just need a little bit and it's, it's not an issue. Usually if you're self-employed part-time work, you need at least a a two-year history. So if you don't have that, then you've gotta think about other ways to get income. And I have a whole chapter in the book about creative ways, you know, if you have assets to create an income stream, that would be considered Qualified income.
Amy Goscha (13m 47s):
Yeah, And, I, like your ideas And, we will talk about those. I think one point that is really good in your book that you make is, can you talk a little bit about, you know, that six month period that you're receiving maintenance to qualify before you can even refinance? Can that come from a joint account or does it have to come from an account in your sole name? Their name? Your name?
Jeff Landers (14m 5s):
No, it would need to come from the spouse that you're divorcing and it should come from their separate account into your separate account.
Amy Goscha (14m 14s):
Jeff Landers (14m 15s):
And otherwise, if it's coming from a joint account to a lender, it may look as if you're paying yourself.
Amy Goscha (14m 21s):
Right. Exactly. So I think when people are, like you said, detangling themselves, sometimes they have these joint accounts, and so if you're paying temporary spousal maintenance, it needs to come from a separate account, not a joint account.
Jeff Landers (14m 32s):
Yes. From from a separate account going into a separate account so that you have proof because it became from a joint account into a joint account, they'll just say, okay, you know, you're paying yourself, that doesn't count.
Amy Goscha (14m 45s):
Let's talk about The debt to, I know I'm jumping around a little bit, but The debt to income ratio. Can you explain what that is and what are some of the issues related to that?
Jeff Landers (14m 53s):
Yeah, so I mean basically when you apply for a mortgage, they wanna make sure that you can afford this mortgage. So, so you're debt to income ratio there. There's actually two parts. There's a front number and a back number in. In most cases, the front number basically is the principle and interest that you would be paying on the loan, your real estate taxes, your home insurance and association fees, like the N H O A, that's the first number. Ideally, banks like to see it around 28%, although there's some leeway in that. Okay. The backend is what, what I just described before, they call it pia, principal Interest Tax Insurance Association fees.
Jeff Landers (15m 38s):
The backend is that number plus all your monthly debt obligations, meaning your credit cards, there's student loan car payments. If your paying Alamo alimony or child support, that usually goes in there as well. Although there's ways to get around that. So that back number, they like it to be around 36%, but people have gone like up to 49%. It's very interesting. They just came out like in the last week or so. And I think it's effective. This May 1st where Fannie Mae and Freddie Mac, right.
Jeff Landers (16m 19s):
The ones that buy the mortgages from mortgage lenders and all of that, they're putting what they call overlays on DTIs that are in excess of 40%, meaning they're adding extra fees that if your D T I is over 40%, it's gonna cost you more money.
Amy Goscha (16m 38s):
Jeff Landers (16m 39s):
Yeah. So, because I think, you know, they're getting concerned right now and they're worried about, you know, defaults and you know, if we're going into a recession, maybe people will start losing their jobs. And so they're concerned about that. D T I, so one of the things we try to do early on in the Divorce negotiations is how do you start paying that debt down? Because that accomplishes two things. If you start paying off credit cards, okay, one that will lower your D T I and two, it will also increase your credit score. so it sort of killed two birds with one stone. And again, they're ways to get around it. I mean, it could be from, you know, the marital assets, or you could actually assign some of that debt to the other spouse if they're willing to take that on.
Jeff Landers (17m 28s):
Again, that's where the negotiation comes in, where they could say, fine, I'll take care of all the credit card debt, but you know, let's go back to the 401k then you can't have 50% of that. So, you know, and then there we gotta do the map to see if that really makes sense or not. But there are ways to horse trade to lower the D T I and improve your credit score at the same time.
Amy Goscha (17m 52s):
Yeah. Can you explain to me, in your book, you talk about a pre qualification letter versus pre approval and what the differences are and why pre approval is important?
Jeff Landers (18m 2s):
Well, the pre approval means that you've pretty much gone through most of the approval process. Okay? You provided proof of your income, you know, your W two s, your tax returns, they've gone through, they've pulled your credit, they've done all of the things that are required to get you approved. A pre-qualification is, I'm on the phone with you. So Amy, what do you think your credit score is about? How much do you make? Yeah, it sounds like you can afford this mortgage. Okay. There's really been no due diligence and no checking into it. I'm taking your word that, and most people are wrong.
Jeff Landers (18m 42s):
First of all, you know, if they go to a credit com or whatever, they're getting a vantage score that, although that's going to change, most banks are still using a FCO score and specifically a FCO score. There's like 26 different FCO scores, whether it's for credit card and or auto loan. Well, there's also for mortgages. So most people are wildly wrong. You say, yeah, I have a 700 credit score, and then when you pull it, they have six 30. In my opinion, the pre-qualification really isn't worth the paper that it's written on because we didn't check anything. I didn't pull your credit. I don't know exactly how much you're making. you know, maybe this is a new job you started and it's not gonna count.
Jeff Landers (19m 24s):
Maybe you have a side gig and you're including money in that, and it may not count. You may be thinking about your alimony, but it's not gonna last for the, for three years. So that may not count. So the pre-qualification really isn't worth very much I mean, you know, maybe it's like, okay, maybe you can afford a $300,000 mortgage. So if you want start looking at houses in the $400,000 range, but it's really not worth much. Whereas the pre-approval pretty much means that you've been pre-approved, that we've done the due diligence. Obviously, if you haven't found a house yet, there's no appraisal done, and it's still subject to certain things before it's a done deal.
Jeff Landers (20m 7s):
But at least we know what your credit scores are, what your credit report, you know, do you have late payments? Did you have a foreclosure three years ago on another home? We have all that information, you know, how much you make? Is it all salary? Is it bonus? Is it what? Have you been on the job for a couple of years? We have all that information. So then we could sort of rest assured that, yeah, you can afford this mortgage. Now, again, we don't know right now, mortgage rates have been changing so quickly. So maybe that pre approval is good for a six and a half percent mortgage, but if all of a sudden it goes to seven and a quarter, you may no longer qualify.
Amy Goscha (20m 46s):
Right? It's just more expensive now. And also, I have had Attorneys come to me and say, look, here's a pre-qual letter my client can refinance. And I think it's important, even for Attorneys to know, like you need that pre-approval. you know, when you're advising clients or when you're agreeing to certain terms in a Separation agreement, And, I. Think the other piece, you know, that I'm working on is what is my client's budget? Because in Colorado we have a spousal maintenance statute where it's a formula and there's a cap to it. And when you go beyond the cap, the court is really looking at your need. And so when you're looking at like a pre-qualification, when you're talking to the mortgage broker, I mean they're gonna be asking you what kind of maintenance and what kind of alimony, I mean, maintenance, alimony, and then child support are you gonna be getting?
Amy Goscha (21m 33s):
So those numbers, you need to have those in order to even go through this process that you, And, I are talking about.
Jeff Landers (21m 40s):
Right? And what other income do you have? Because if you, if you have a W2 job, then that's in addition to alimony and child support, then that might be enough for you to qualify. Or there are other ways to create income, or you take a small, if you have assets, you take a smaller mortgage. Or we may find at the end of the day that, you know what, no matter what creative ideas we have or whatever, it's just not gonna happen for you. And then, you know, I've seen so many times where people waste months and months negotiating back and forth between the two Attorneys about one spouse keeping the home, and they're spending thousands in legal fees and all of that, only to find out at some later time that there's no way they're gonna qualify.
Jeff Landers (22m 26s):
Better to find that out upfront if there's really a feasible shot at it. If there isn't, then okay, then let's talk about what your other options are.
Amy Goscha (22m 35s):
Ryan Kalamaya (22m 37s):
This episode is brought to you by our law firm, Kalamaya, Goscha. Amy, And I describe our law firm as an innovative and ambitious trial team. The pushes the boundaries to discover new frontiers in Family, Law personal injuries and criminal defense in Colorado. We currently have offices in Aspen, Glenwood Springs, Edwards, Denver, and Boulder. If you wanna find out more, visit our website, Kalamaya dot law. Now back to the show.
Amy Goscha (23m 7s):
Okay. So one question that I do have is that, say that you have someone who's not just a W2 employee. You mentioned if you're self-employed, they wanna see about two years, right? Is that correct? Yes. What if you're a W2 employee and then you have bonus income? Like what is the duration and how do they look at that?
Jeff Landers (23m 24s):
They're going to want to see consistency, and they would want to see hopefully that the bonuses are going up. Okay. The last thing they wanna see is you got a bonus last year, but this year you're not getting any, or it's half the value. The mortgage lenders are always doing a risk assessment. Okay. They wanna make sure that you, you know, you're going to be able to pay your mortgage, pay your other bills, your other monthly obligations, and the last thing they want to do is foreclose on on your home. They don't want to take that back. So they wanna make sure before they approve you, that they're reasonably sure that you, you can afford this with and still put food on the table.
Jeff Landers (24m 4s):
This is not, you know, your last penny, and you could afford all your other obligations and, and still live life. And that's why we spoke before about the D T I, why they have this. They wanna make sure you're not spending 80% of your income on housing expenses, because then they're gonna say how you're gonna afford the rest of life.
Amy Goscha (24m 24s):
Right, exactly. So let's talk a little bit about when you're thinking about keeping the home about separate property versus marital property. So Colorado is not a community property state, right? The legal definition of Separate versus marital property is property acquired prior to marriage is separate. Property acquired during marriage is marital And Colorado. You can change the nature of separate property. So say that someone has a house that's titled in their name, but then they add their spouse and it's been the house that they've lived in, you know, and raised their kids for years. You can change the nature of that home, the property that could be considered marital property, right?
Jeff Landers (25m 5s):
Amy Goscha (25m 7s):
Yeah. So is there anything related to separate property versus marital property that you think would be important?
Jeff Landers (25m 13s):
I've worked on a number of situations. So let's say someone owned a home prior to marriage and they sold it and they had $50,000 in equity, and now they took that $50,000 and put it into the new home. Okay. There's always the question, okay. When you figure out, and the property's now jointly held between the two spouses, the question is, does that spouse that put the $50,000 in, do they get that back because it was their separate property? Or is it now considered that he or she made a gift to the marital estate?
Jeff Landers (25m 53s):
Good question. Okay. I've worked on both cases where it's like, no, you put the money in, it was a gift, you know, otherwise, why did you title it jointly or tenants by the entirety? And. I in other cases is no, you know, we're selling it. There's $300,000 worth of equity. First gimme my 50 grand back that I put in, and then let's split it. That's where the advantages of a prenup come in, because right, you could cover that scenario and say, look, this $50,000 is from my previously owned home. It's premarital, I'm putting it in. But if and when something should happen first I get my 50 grand back.
Jeff Landers (26m 33s):
And then if there's any remaining equity, we divided 50 50 or whatever. And in some cases, especially people get married later in life, both spouses may have have owned a home and sold, but maybe one has 20,000 that they're adding in and 50,000. So to avoid future problems, it's probably best to address it in a prenup.
Amy Goscha (26m 54s):
Yeah. So even people not divorcing, but second marriages are, like you said, getting married later in life, Absolut,
Jeff Landers (26m 59s):
Amy Goscha (27m 0s):
Yeah. Maybe they have adult children. And. I mean it's even like an estate planning tool.
Jeff Landers (27m 5s):
Oh, without question. Yes. Especially second or or third marriages.
Amy Goscha (27m 9s):
Mm. Yeah, exactly. No, that's great. Well, let's talk about some of the creative solutions that you offer. I mean you, you offer a lot of creative solutions about creating income streams. Can you talk about some of those options?
Jeff Landers (27m 23s):
Actually, my favorite one is doing the immediate fixed annuity. Because essentially you're taking, let's say, a hundred thousand dollars and you give it to an insurance company and you're buying an annuity, and they have different terms. I mean many people do it to have lifetime income, which you could do, obviously, depending on your age and whatever. The older you are, the more you would get per month. But for the PURPOSES of creating an income stream so that you could qualify for the mortgage, most insurance companies usually have a minimum term of five years. So, okay, so now we've covered that 36 month requirement to have the income coming in.
Jeff Landers (28m 4s):
So basically you turn over a hundred thousand dollars, they pay you monthly for those 60 months, and most of it is not taxable because most of it you're getting back, they consider it a return of principles, so you're not paying tax. Now, there is an interest component, so you're getting a little bit more, you might end up over the 60 months getting 106,000. So a hundred thousand is your return of principle. The 6,000 is interest. You would pay taxes on that. But this gives you a guaranteed income for those five years. And all you need to do is show that you've received the first payment from the insurance company.
Jeff Landers (28m 46s):
So you just show that Metropolitan Life Insurance, or Prudential or whomever deposited that money into your account. You're good from a mortgage point of view.
Amy Goscha (28m 58s):
Yeah, that's a great solution.
Jeff Landers (28m 60s):
Yeah. Now, obviously you need the assets. I mean, not everybody has an extra a hundred thousand dollars lying around, especially if they use some assets to buy out their spouse, the share of their home equity. But a lot of people do. You see many instances, especially older people, seniors, which category I would fall into. Maybe people aren't working, maybe they're retired. Okay. They have a lot of assets. They have money sitting in the stock market or in CDs or whatever, but they're gonna have a difficult time getting a mortgage because they have no income. Maybe they have some from dividends, and that's a whole different topic, because that could count. But then they could take a hundred or $200,000, buy the annuity, and have the income coming in show receipt of the first month's payment, and you're good as gold.
Amy Goscha (29m 48s):
Yeah, no, that's great. What are some other interesting, you know, you talk about a revocable trusts, you know, some other,
Jeff Landers (29m 55s):
Amy Goscha (29m 56s):
Jeff Landers (29m 57s):
Well, so the revocable trust is basically a trust that's created. Okay. It could be changed at any time. It's revocable, meaning you could change it, you could eliminate it or whatever. As opposed to an irrevocable trust, this should be set up prior to applying for a mortgage. Okay? The funds should be transferred directly into the trust pursuant to the Divorce. There should be language in the Divorce settlement agreement saying how much is being transferred into the trust. Okay? The beneficiary would be the spouse that's keeping the home and wants the payment coming to them.
Jeff Landers (30m 38s):
The settlement agreement and the trust agreement should stipulate how much will be paid on a monthly basis. And then there has to be enough money in the trust to cover it again for at least 36 months. And you only need to show proof of the first month's receipt. Again, what you don't want to do is have the money given to the spouse who's keeping the home, and then he or she puts it in a trust, because then again, it looks like you're paying yourself. so it should be pursuant to the Divorce, just as monies get transferred, whether you're splitting a bank account or you know, a 401K or whatever, using a quadro, in this case, money should be transferred into the trust pursuant to the Divorce, and there should be specific language in the settlement agreement talking about that.
Amy Goscha (31m 30s):
Yeah, no, that's a great option. The other two I wanted to just touch on is the reverse mortgage for, you know, what we call like gray hair divorces. And then also just to talk about your company and like the fractional ownership and the home.
Jeff Landers (31m 43s):
Oh, okay. So the reverse mortgages is for seniors that are 62 years or older. Now, they do have some of these reverse mortgage companies have proprietary products that would work for 55, but because of interest rates being higher, a lot of them sort of put a freeze on it. Right now, basically, it's exactly what it says. It's it's reverse of a regular mortgage. A regular mortgage, you get money and you're paying the mortgage lender your monthly payment with a reverse mortgage. Either they'll pay you on a monthly basis or they'll give you a lump sum, or they'll give you a line of credit.
Jeff Landers (32m 26s):
There's a number of things that you could do. It's a non-recourse loan, meaning that they're only going to look to the house to get repaid. So if you die and your mortgage is worth more than the house, your heirs don't have to pay anything. That's the loss of the mortgage company. Now, this is also insured. So with the reverse mortgage, part of your balance is for mortgage insurance because this is insured by the federal government. Okay. And there are a lot of other requirements, and the amount that you're entitled to depends on the equity in the home. Usually you want to have at least 50% or more equity in the home.
Jeff Landers (33m 8s):
And two, it depends on the mortality table. So you're going to get a lot less at the age of 62 than you would at 78. So there's formulas to figure out exactly how much you might get. But for a lot of people, that's a great tool. you know, you get a lump of cash or a monthly payment, you never have to make another payment as far as principal and interest, you still have to pay your real estate taxes, you still have to pay homeowner's insurance, and you still have to maintain the property. So that's important. But other than that, you'll never have another mortgage payment as long as you live. And it could be used for refinancing your existing home, or there's actually a reverse mortgage that could be used for purchases.
Amy Goscha (33m 55s):
Oh, interesting. Those are great options. So I think what we'll wrap up with is if someone wants to work with you, like if you And I, were working together, And, we, I was representing, you know, like a stay-at-home parent, how would that look like if someone were to come and start working with you? And maybe you can talk about the options of fractional ownership. you know, I thought that was very interesting that a product that your company offers.
Jeff Landers (34m 19s):
Yeah. I mean we're in partnership. We're not off offering the equity sharing aspects. Yeah. So they're companies that will basically become your silent partners. So let's say you need a hundred thousand dollars to buy out your spouse because you don't have those assets sitting around, and you can't qualify for a mortgage that's a hundred thousand dollars more than the current mortgage balance that you wanna refinance. So basically, you would bring in this company as a partner, and they all have different programs and figure things out, but let's say they would, again, depending on how much your home is worth and, and all of that, and how much equity, they would give you a hundred thousand dollars and you would either have to sell it.
Jeff Landers (35m 5s):
They usually have a period of 10 years, some have 15 years, some go up to 30 years, whatever it is, you either pay them back during that time, or you refinance to get the money to pay them back, or you have to sell the home. Now, of course, if they're giving you that money, now they're taking a risk. So they may get 30% of whatever your homes worth 10 or 15 years from now. So they become your silent partner. They're giving you money upfront, but when it's time to sell or as per their terms, you have to sell, they're gonna get their share for their, their risk. But if there's no other way to do it, then that may make a lot of sense for some people that have no choice but still want to keep their home.
Jeff Landers (35m 46s):
The other creative tool is what's called a lease sale back, where basically, whether it's to my company, we do that, or there are other companies that do that. Basically, we would buy the home from you and then rent it back to you. So you no longer own your home, but you don't have to move out. But now you're paying rent. And what we do and, and what a lot of other companies do is we give you the option to buy it back, obviously at a profit. Okay? Because we're taking the risk of all of this. you know, it's, it's sort of a last resort. You don't want to go from homeowner to renter and then have to be in a situation to buy back your home at a higher price.
Jeff Landers (36m 28s):
But again, you know, if that's the only way that you could stay in the home, your kids could stay in their current school or whatever, it's the home you love, you decorated it, you furnished it, you did whatever, maybe that's better, and it saves you, look, you're going through a Divorce, you're going through all of this. The last thing you really want to think about is now I have to pack up and move. Right? Okay. It's just one more thing on your plate that's traumatic. You don't want to have to deal with it, start looking for a new place. So maybe you do that sale lease back, maybe that may not be the perfect scenario, but it still allows you to stay in your home. So yeah, I think that's, for some people it's certainly a good option. Yeah. Or a feasible option.
Jeff Landers (37m 8s):
We like to work with the Divorce attorney and their client as early in the process as possible, because whether it's for making sure that they're on the title for 12 months or to even see what their credit is. Okay. you know, divorces, as you know, I've seen very few divorces that happen in just a couple of months time. Right. you know, usually a year I mean I've had some that go on for years, unfortunately. But if there's problems, let's say in their credit report, And, we find that upfront we could start taking care of that right now to clean things up. So when it's actually time for them to apply to do a refinancing or a new mortgage, we've been able to clean things up.
Jeff Landers (37m 54s):
Things like what we talked about, maybe paying off some of the credit cards that reduces the D T I, it brings up your credit score. It cleans up your credit report. The more time we have, the better it is. And also to figure out early on, is your wish to stay in the home? Pie in the sky. you know, if you're getting a thousand dollars a month in alimony and child support and you have no other source of income and you have very few assets, you're not gonna be able to take over a half a million dollar home. Right. Let's not spend the time and money negotiating for something that is not realistic. Better to know that upfront and then see, okay, do you sell the home?
Jeff Landers (38m 37s):
Do you bring in one of these equity sharing companies? Do you do a sell lease back and at least have the opportunity to stay in the home, or you just sell it and take your share of the money and buy a condo or something, a smaller home or rent for a while?
Amy Goscha (38m 53s):
Yeah, I know. And also I think key is a lot of times when you're going through Divorce, you want one less thing where you're having to move. So some of those creative options to stay in the home, I think are really good options for people to consider,
Jeff Landers (39m 7s):
At least for a temporary basis. Yeah. you know, I usually tell people that for a year after their Divorce, don't make any big life decisions. Don't buy something in the mountains or whatever because you want to get away. Don't get remarried in a year because it's a very emotional thing. And you know, for my other business, bedrock Divorce advises, my tagline is think financially not emotionally. Okay. Divorce is very emotional and especially if it's, you know, a highly contested Divorce. I mean by the time it's over, everybody's worn down, including the Divorce professionals, because you do get personally involved in your, in your finance cases.
Jeff Landers (39m 49s):
It's like, you know, just chill out for a year. Don't make any major life decisions. Where you gonna live, who you gonna live with and all? Give yourself some time to calm down and get a life plan.
Amy Goscha (40m 3s):
Yeah. You And I are on of the same mind. I give my clients the exact same advice, and if they're insistent on getting remarried within that first year, I say, please get a prenup.
Jeff Landers (40m 12s):
Oh yeah, for sure. Or if you're gonna live with someone, you know, get a cohabitation, you know? Yeah, exactly. you know, and you know, if that's done well, then, you know, if they do get married, can just convert into a premarital agreement.
Amy Goscha (40m 28s):
Yeah. Well, no, Jeff Thank You, so much like great information and
Jeff Landers (40m 32s):
My pleasure. Yeah.
Amy Goscha (40m 33s):
How can people Listeners get ahold of you? What's the best way?
Jeff Landers (40m 37s):
Well, my website is Next Act Properties dot com. You could go there and buy the book in the navigation. It's, you click on the book tab. It's also available on Amazon as a Kindle or in paperback. My 800 number is 800. I'm looking because I never call myself. Yeah, it's, it's (800) 795-2445.
Amy Goscha (41m 1s):
Great. Again, everyone, Jeff Landers, great resource. Give him a call if you have some questions regarding whether or not to keep your house Thank You so much, Jeff.
Jeff Landers (41m 10s):
Ryan Kalamaya (41m 11s):
Hey, everyone, this is Ryan again, Thank You for joining us on Divorce at Altitude. If you found are tips, insight, or discussion helpful, please tell a friend about this podcast. For show notes, additional resources or links mentioned on today's episode, visit Divorce at Altitude dot com. Follow us on Apple Podcasts, Spotify, or wherever you listen in, many of our Episodes are also posted on YouTube. You can also find Amy And me at Kalamaya.law or 970-315-2365. That's K A L A M A Y A.law.