Monthly Archives: March 2012

Protect your credit score while transitioning through the divorce process

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1 Divorce beacon score

1 Divorce beacon score

You won…the house is yours and now you do not qualify for the mortgage to buy out your partner……….Is this the situation you find yourself in?

I recently worked with a woman who had separated from her husband in 2008. She is living in the family home with her children and her husband is making the mortgage payments. Something happened in their dispute and along the way he started missing mortgage payments. The mortgage is in both names and the end result is that her credit score dropped significantly.

December 2011 she received the court ordered divorce settlement, which granted her the family home. This means she now has to secure a mortgage in her own name to take over the mortgage loan and pay him his share of the settlement agreement. She went to the current mortgage holder (the bank) to arrange for a new mortgage. The bank said no thank you, we won’t refinance your mortgage for you.

On paper she should qualify for the mortgage on her own. She has a fulltime job and she is receiving child support payments regularly. She has sufficient income to qualify for the loan and to be able to afford to make the mortgage payments on time. The problem here is that her credit score is significantly below the threshold that lenders rely on to determine her credit worthiness to qualify for the loan.

Protect your credit score
Your credit score is what gives you the ability to finance future purchases. If your score becomes damaged during divorce, moving on can become extremely difficult. Part of my mortgage service is to counsel you on ways to preserve and improve your credit score during divorce.

Remember, if mortgage payments are missed because your spouse has failed to make a payment, YOUR credit score will suffer too. Regardless of what your divorce decree says or what’s fair, if you have a joint debt, you’re responsible for it.

Here are some ways to protect your credit score BEFORE any payments are missed:
• If possible, close all joint credit cards immediately. If you can’t close one because there is still money owed on the account, freeze it so no one can continue to use it.
• Make sure you continue making at least the minimum payments in the meantime. Then come to an agreement with your spouse on transferring the joint debt to individual credit cards.
• If you do not have a credit card in your own name, get one now. Building your own credit history takes time, so start today!
• While waiting to sell your home or refinance it, make sure your mortgage payments are up to date, even if it comes out of your own money. This protects your credit score and you’ll likely be able to claim the funds back under court order.
• After you have moved out of the home, make sure have your name removed from the property title AND from the mortgage, so your credit score doesn’t continue to be impacted.

For this client, she was able to get approved for a mortgage with a lender who charged a fee and a higher interest rate for a one year open term. I am working with her to improve her credit score and in one year we can look at placing her mortgage back with a traditional lender (mortgage company or a bank).

I believe that if she had of consulted with me earlier in the process I could have given her some advice and developed a strategy that would have helped her to achieve her goal, owning the family home, without the last minute stress, frustration and added expense.

If you are going through the divorce process and owning the family home is one of your goals, let’s talk and develop your strategy. Call, text or email me today….. Karen@Mortgagecentrebc.com 604-726-9550

The Joy of Ex: Divorce and your mortgage

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Debbie Burgin is rebranding divorce one woman at a time. If you would like more information about Debbie Burgin and her divorce coaching services, please go to her website The Joy Of Ex

Debbie Burgin: This is Debbie Burgin at The Joy of Ex, and today I’m interviewing mortgage broker Karen Boies. Karen is a Vancouver mortgage broker who specializes in…?

Karen Boies: I specialize in working with women in transition, so women that are going through divorce that need some additional education and support in that planning process.

Debbie: OK, so that said, when I was going through my divorce, my first thought was, where am I going to live, where are my children going to live? But I also thought, even though I had a house, I thought, I have no money to pay the mortgage on this house, and I can’t afford to move. So, what are the implications with regard to women who are divorcing? How do you help them decide those things? Can I move, can I afford to stay, what are my options?

Karen: Absolutely. So, what I like to do as a mortgage planner is sit down and kind of work out a strategy or a plan. So we look at where they are right now, the home, the job, whatever income that they’ve got coming in. Hopefully their spouses, if there are kids involved, they’re paying child support, maybe they’ve agreed to pick up some of the mortgage payments. And just sort of look at the financial situation as it is right now, and then look at it based on what the woman thinks she’s going to end up with. You know, we know under the courts that they’ll have to pay a certain amount of child support, so we’ll look at that, whether or not they think they’re going to get any alimony, and then look at the scenario if they sell the house, and how much equity they might end up with out of that house. And now once I have that information, I can show them what they’ll qualify for in a mortgage to buy their own home, if they have to sell and move. Or alternatively, we can look at the option of using the child support, the alimony, if they think they’re ultimately going to end up with alimony. And then the solution of them staying in the home and buying their partner out.

Debbie: So, what would you say are the first steps? Let’s say I’m getting divorced, so I know that my husband is heading out the door, I’m moving out, whatever the circumstances are. I’m going to end up having to consider where I’m going to live. Where are my children going to live? What are my first steps?

Karen: Well really, I think that the first steps are…hopefully the couple will have a conversation when it comes to what’s in the best interest of the kids. So if the relationship is ending, hopefully he wants you to stay in the house and you will keep your financial situation as if you were still living in the house and keep paying the bills. But what I tell women is, if you don’t already know whether or not you have a credit score, you need to make sure that you have a good credit rating. And then after that, all credit cards or bank cards that you have in a joint name, if possible you need to close those so that you’re not continuing to accumulate debt on them. Or if you can’t close them, then you need to freeze them.
Another thing you need to do is, if you are getting child support or any alimony, you need to keep a record. It’s surprising how many people think it’s OK to accept cash and not deposit it in the bank account. Like, keep 500 bucks cash and they don’t put it in the bank account. Well, when everything gets settled and you get a separation agreement, you’ve got to have a record that you’re getting this money. So if they are paying you cash, you need to deposit it so that there’s at least a 90 day history of you receiving this money.
Now, I can use it to qualify you for a mortgage. Just to let you know, I get paid by the bank in most cases. I mean, if we have to use a private lender to fund the mortgage for you, they could charge a fee. However, if I get you financing at a traditional bank or a traditional mortgage company, they’re going to pay me for bringing the client. So, I work for you to help you reach whatever your goal is, and then after the mortgage funds, I stay in touch with my clients to work with them to continue to work on things like budgets, optimizing their mortgage so that they take advantage of it and pay it down if they can so that they’re developing more equity for themselves for going forward.

Debbie: Awesome. You are in Vancouver.
Karen: Yes.
Debbie: Do you do mortgages outside of Vancouver?
Karen: Yes.
Debbie: OK.
Karen: I’m licensed in the province of BC, so I can do mortgages throughout BC. I’ve done one for family members back in Ontario and New Brunswick, so I can do a one off like that. And we just do it through Skype conversation and email and texting if we need to.
Debbie: How do we get hold of you?
Karen: My name is Karen@mortgagecenterbc.com, and my website is KarenBoies.ca.

Thank you for watching the interview. If you have any other questions, please call Karen at 604-726-9550