#99 - Should You Keep the House After Divorce? A Smarter Way to Decide

Eric Blake: You cannot do an equity buyout or a loan assumption until the divorce is finalized and historically, the attorney says, okay, who wants to keep the house? Someone says, I do, and they do not figure out whether or not it is possible. That is what I want to change. I do not want someone to have to make that mindset shift after it is all said and done.

Eric Blake: Welcome to another episode of the Simply Retirement Podcast. I am your host, Eric Blake, practicing retirement planner for over 25 years, founder of Blake Wealth Management, and I would not be the man I am today without the women in my life.

On today’s episode, I am going to be joined by Stacey Ellison, Certified Divorce Lending Professional and Divorce Mortgage Planner at Divorce Mortgage Solutions. Stacey works with individuals navigating divorce and helps them understand the financial realities around home equity, mortgages, and housing decisions that often become part of the divorce settlement process.

Today we are going to talk about divorce, mortgage planning, and why understanding your housing options early in the process can make a major difference. This is especially important for women who may suddenly find themselves responsible for major financial decisions during divorce or any other major life transition. Stacey, welcome to the Simply Retirement Podcast.

Stacey Ellison: Thank you, Eric. Thank you so much for having me. I am happy to be here.

Eric Blake: Absolutely. So excited to have you. I know we had a chance to chat a few weeks back, and you shared so much great insight. I am looking forward to the opportunity for you to share that with our audience as well.

But if you would, before we dive into some of these topics, can you share just a little bit about your background, what led you into the work you are doing today, and more specifically how you came to focus on working as a divorce lending professional?

Stacey Ellison: Sure. I have been in the mortgage industry since, oh gosh, like the dawn of time. I started as a loan processor. It was my first big girl job out of college with a psychology degree and not going to graduate school.

So I started working as a processor. I have been a loan officer. I have been an account executive. Basically, since around 1996, I have been in the industry, with a little break in 2008 when everything exploded, but I am back.

I have done everything from processing, origination, and account management. Around 2019 or 2020, I had several people come to me who were recently divorced, looking to do an equity buyout.

I said, I need to refinance. Here is my settlement agreement. Within six months, I must have had six or seven clients like this, and every single one of them had challenges, whether it was qualifying income or something else. We ran into roadblocks all along, and I do not like roadblocks. I do not like not knowing how to help people, and I do not like taking no for an answer.

In my research, I ended up down this rabbit hole of divorce lending, and I discovered that there is a certification in it, and it is a real thing, and there is a real need for it. The Divorce Lending Association offers the certification, and I got it.

I have been helping divorcing homeowners figure it all out ever since, so that you do not go through all of the loss associated with a divorce, wanting to keep the house, fighting to keep the house, and then not being able to, and having to go through another cycle of loss, heartache, and trauma.

That is what led me to where I am.

Eric Blake: That is perfect. What I think is really important to distinguish is that you actually serve two different roles in the work that you are doing around these divorce-related mortgages, and I think it is important for listeners to understand both of those as well.

On one side, there is this work that you do as a mortgage planner where it really is helping people understand their options, how housing decisions fit into the divorce settlement. On the other side is somebody actually getting a mortgage.

One of the things we discussed when we first talked was that amazing spreadsheet you showed me. Going through that divorce mortgage planning does not necessarily mean that somebody is actually going to get a mortgage at all from you.

Can you talk about those two different roles and how they serve clients in different ways, and where they ultimately come together as women are coming out of divorce or making these big decisions during the process?

Stacey Ellison: Sure, of course. Divorce mortgage planning is the process of evaluating mortgage options through the lens of a divorce. Underwriting guidelines change when a divorce is present.

Using that lens and applying it to the settlement agreement allows me to help people be prepared for what a mortgage or an equity buyout will look like afterward.

It also means being involved with the divorce team to make sure that the language in the settlement agreement does not conflict with underwriting guidelines. There are requirements for what constitutes qualified income, whether it is alimony, child support, or the distribution of assets.

By being involved early, I can help ensure that the settlement agreement aligns with underwriting guidelines once the divorce is finalized, because you cannot do an equity buyout or a loan assumption until the divorce is finalized.

Historically, the attorney says, okay, who wants to keep the house? Someone says, I do, and they do not figure out whether or not it is possible. That is what I want to change. I do not want someone to have to make that mindset shift after it is all said and done.

If it is not going to be possible to keep the house, it is better to figure that out upfront or better yet, figure out a way to keep the house.

Eric Blake: I think that was one of the things we walked through, those different scenarios where small adjustments, what I call lever pulls, could make a big difference.

Sometimes those small adjustments might actually put you in a position where you can keep the house.

And you have already touched on it a little bit, but talk about starting early in the process.

Stacey Ellison: Yes, definitely. That is where my experience in the mortgage industry and my familiarity with underwriting guidelines gives me the knowledge base to say, okay, a conventional loan is not going to work here.

We have to look at FHA, asset depletion, or another strategy to create usable income so that you can qualify and ensure the mortgage fits into your long term financial stability.

You do not want to help someone keep a house now only for them to have to sell it six months or a year later because it does not fit into the long term plan.

Eric Blake: Where do you typically fit in the process? Is it someone reaching out to you, or do attorneys and mediators bring you in?

Stacey Ellison: It can be all of those. I have referral partners, attorneys, financial planners, and people who find me on my website, in groups, or through podcasts.

The only time it is too late to bring me in is when you have already signed on the dotted line.

Eric Blake: One of the valuable things you shared is that the planning work can be done separately from the mortgage itself.

Stacey Ellison: It can, and it provides objectivity. I am not giving advice with the intent of getting the loan. There is no obligation to use me for the lending part afterward.

People can take the report and go to anyone. Most people do work with me, but there is no obligation, and I make that clear upfront.

Eric Blake: That is such a valuable service. The biggest financial mistakes often happen when we do not understand long term consequences or when emotions are driving decisions.

Divorce is one of those times where big financial decisions happen quickly. One of the biggest questions is whether to keep the marital home or sell it.

What factors should someone consider before deciding whether keeping the house makes sense?

Stacey Ellison: Budget and what they are comfortable affording. They may be comfortable with the current mortgage, but if there is an equity buyout, the mortgage balance will increase unless they offset it with other assets.

It is about looking at all options to find the most affordable and sustainable solution within the long term plan.

Eric Blake: Let us talk about interest rates. Many people have very low rates from a few years ago, and today’s rates are much higher.

How does that impact decisions around keeping or refinancing a home?

Stacey Ellison: It is not as simple as just removing one party from the loan. In some cases, it may be possible to keep the rate through a loan assumption.

Not all lenders allow this, so the first step is to call the current lender and ask if it is an option.

Assumption assistance is something I help with, because navigating that process without experience can be very difficult.

I explore all options, including assumptions, equity buyouts, and purchasing a new home. With an assumption, you cannot take cash out, so you need another way to handle the equity buyout.

Eric Blake: Even with higher rates, there may be situations where refinancing makes more sense.

Stacey Ellison: Yes. For example, if someone has a shorter term loan with a lower balance, refinancing to a longer term, even at a higher rate, could improve cash flow.

We look at all options and provide the numbers so someone can make an informed decision.

Eric Blake: Many of the women we work with may not have been the primary income earner or involved in the mortgage process. What challenges do they face when qualifying for a mortgage?

Stacey Ellison: The biggest challenge is often lack of income, especially in gray divorce situations.

Sometimes there is a lump sum instead of monthly support, so there is no income to qualify. We look at options like asset depletion, retirement distributions, or annuities to create qualifying income.

I work with financial planners to determine what works best from a tax and income perspective.

Eric Blake: That highlights the importance of having a team.

Stacey Ellison: Absolutely. Divorce mortgage planning ensures you are not leaving the outcome to chance. You understand the steps, the structure, and the language needed in the settlement agreement.

Eric Blake: Where do people unintentionally create more stress or financial difficulty?

Stacey Ellison: Not keeping an open mind. People may become focused on keeping the house because of emotional attachment, but exploring other options could put them in a better position.

Also, not being organized or trying to handle everything alone can create unnecessary challenges.

Eric Blake: Let us talk more about asset depletion.

Stacey Ellison: If someone receives a lump sum, like a million dollars, underwriting may divide that amount by a set number, often 84 months, to create qualifying income.

That could result in around $12,000 per month of qualifying income, even without employment income.

Eric Blake: That helps show that not having employment income does not automatically disqualify someone.

Stacey Ellison: Correct. Retirement income can also be used if structured properly.

Eric Blake: Where does Social Security fit in?

Stacey Ellison: Social Security is qualified income. You need the award letter, a 1099, and proof of deposit. The same applies to pensions.

Eric Blake: What about support payments?

Stacey Ellison: Support income requires a six month history and a three year continuance. Depending on how it is structured, it may or may not qualify.

Eric Blake: Do you provide input on structuring those agreements?

Stacey Ellison: Absolutely. If it does not meet guidelines, I recommend revisiting it with the attorney.

Eric Blake: Can you explain what it means to be a Certified Divorce Lending Professional?

Stacey Ellison: It involves training across family law, tax law, real estate, mortgage guidelines, and financial planning as they relate to divorce and housing.

I stay in my lane, but I understand how these areas interact. The marital home impacts all of them, and mortgage guidelines change during divorce.

Traditional lenders do not have this training and only come in after the settlement is complete. Divorce mortgage planning happens earlier and helps prevent long term issues.

Eric Blake: Are there geographic limitations?

Stacey Ellison: I can do planning nationwide. For loans, I am based in New Jersey, but I can assist across the country or refer clients to trusted professionals.

Eric Blake: If someone wants to connect with you, what is the best way?

Stacey Ellison: My website is divorcemortgagesolutions.biz. You can find me on Instagram as Divorce Mortgage Solutions, on Facebook, or call me directly.

Eric Blake: That is perfect. Stacey, thank you so much for joining me. This has been a great and important conversation.

I also want to thank our listeners for tuning in. If this conversation resonated with you, or if you are trying to determine the next best step when it comes to housing decisions during a divorce, I encourage you to reach out and learn more.

These decisions can have long lasting financial consequences, and having the right information at the right time can make a huge difference.

For all the links and resources mentioned, visit simplyretirementpodcast.com. Until next time, please remember, retirement is not the end of the road. It is the start of a new journey.