Prenuptial Agreements

How Does Prenuptial Agreements Affect Mortgages

Gustan Cho Associates are mortgage brokers licensed in 48 states

This guide covers how prenuptial agreements affect mortgage loans. You may have heard of prenuptial agreements if you plan to marry soon. A prenuptial agreement, or premarital agreement, is a legal contract that specifies how a couple will divide their assets and liabilities in case of divorce or death. Dale Elenteny of Gustan Cho Associates explains how prenuptial agreements affects mortgage loans during a during or in the event one spouse passes:

Prenuptial agreements can also affect your mortgage, especially if you are buying a home together or already own one. Prenuptial agreements have no impact on mortgage loan approvals while both spouses are married. It normall comes into play when there is either a death involved or when a couple goes through a divorce.

You will buy the home as separate property, meaning that only one will own the property and be responsible for the mortgage. In this case, the other spouse may need to sign a quitclaim deed or a waiver of marital rights to relinquish any interest in the property. The following paragraphs will cover how prenuptial agreements affect mortgage loans.

Why Get Prenuptial Agreements?

Prenuptial agreements can help you and your spouse protect your property rights and financial interests. It can also help you avoid disputes and litigation in the event of a divorce or death. You may want to consider prenuptial agreements because you have significant assets or debts you want to keep separate from your spouse, says Dale Elenteny of Gustan Cho Associates:

You may need a prenup agreement if you have children from a previous relationship and want to ensure their inheritance rights. You expect to receive a large inheritance or increase in income in the future and want to limit your spouse’s claim to it.

Another reason you may own a prenup is that you own a business or have a stake in a family business and want to protect it from being divided or sold. You want to specify how much alimony or spousal support you or your spouse will pay or receive after divorce.

Buying A Home With An Existing Prenuptial Agreement

If you and your spouse have prenuptial agreements and want to buy a home together, you should review it and see how it affects your mortgage options. For example, your agreement may state that you will buy the home as tenants in common. This means that each of you owns a percentage of the property according to your contribution to the down payment and monthly payments, says Alex Carlucci of Gustan Cho Associates:

Prenuptial agreements can affect a mortgage in several ways, depending on the couple’s marital status and when they took on the mortgage. Let’s take a look at some scenarios.

In this case, you may need separate mortgages or co-sign each other’s loans. You will buy the home as joint tenants with the right of survivorship, meaning that both of you own the property equally, and the surviving spouse will inherit the entire property upon death. In this case, you may need a joint mortgage, or one spouse may need to co-sign the other’s loan.

Buying A Home As An Unmarried Couple

If you and your partner are not married yet but want to buy a home together, consider getting a home-buying prenup. This prenup agreement specifically addresses how you will handle the ownership and financing of the home. Dustin Dumestre, a senior loan officer at Gustan Cho Associates, advises the following:

Prenuptial agreements has no  impact on getting approved for a mortgage while both spouses remain married. However, prenuptial agreements come into play if a married couple goes through a divorce.

A home-buying prenup can help you. Define how much you will contribute to the down payment, closing costs, monthly payments, taxes, insurance, maintenance, repairs, and improvements. Decide how to split the equity and profits if you sell the home or refinance the mortgage. Determine what will happen to the home if you break up, get married, or one of you dies. Protect yourself from your partner’s debts or creditors that may try to attach a lien on the property.

Refinancing or Selling a Home With Prenuptial Agreements

If you and your spouse already own a home and have prenuptial agreements, you should also review your agreement before refinancing or selling your home. Your agreement may have clauses that affect how you can refinance or sell your home, advises John Strange of Gustan Cho Associates, who is an expert in helping borrowers get qualified for a mortgage during and after a divorce:

Requiring consent from both spouses before refinancing or selling the home and stating how the proceeds from refinancing or selling the home will be divided between the spouses.

Specifying how much equity each spouse has in the home and how it will be calculated. You are providing for an appraisal or valuation of the home in case of a dispute.

Things To Consider Before Signing Prenuptial Agreements

Signing a prenup is not a decision that should be taken lightly. A prenup can have significant legal and financial consequences for both parties involved. Hence, it is crucial to seek guidance from a knowledgeable family law lawyer who can provide counsel regarding your legal rights and responsibilities and assist you in creating a prenuptial, equitable, and legally binding agreement.

The income and expenses you and your partner may have during the marriage. The tax implications of having a prenup for your federal and state taxes. The validity and enforceability of your prenup in your state of residence and in other states or countries where you may live or own property. The possibility of changing or modifying your prenup in the future if your circumstances change

How To Get Mutually Prenuptial Agreements That Benefit Each Spouse

If you want a prenup agreement, consult an experienced family law attorney who can help you draft a valid and enforceable contract that meets your needs and goals. You should also ensure that you and your spouse have separate attorneys representing your interests and advising you of your rights and obligations. Marga Jurilla, the national operations manager and licensed loan officer at Gustan Cho Associates, advises the following:

You and your spouse disclose all your assets, debts, income, and expenses to each other fully and honestly. You and your spouse sign the agreement voluntarily, without coercion, fraud, or pressure. You and your spouse sign the agreement six months before your wedding date to avoid any suspicion of undue influence or pressure.

Prenup agreements can significantly impact your mortgage, whether you are buying, refinancing, or selling a home. A prenup agreement can help you protect your property rights, avoid disputes, and plan for the future. However, a prenup agreement can be complex and challenging to draft and enforce. Therefore, you should consult a qualified family law attorney and a mortgage professional before entering a prenup agreement.

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