Divorce Loan Options

[Julie Coleman]

My ex and I purchased a duplex in Glendale, CA as marital property in 2018, yet I am currently in the process of a divorce with my ex.

Due to the divorce proceedings, I would like to know my options regarding the property.

1. 1) I keep the duplex. What is required to take my ex off of the title and loan? He wants out.
   1. Will I need to refinance to get him off of the loan and title?
   2. Will I need to refinance using my income only in order to get a primary residence loan and a lower interest rate?
   3. It is a duplex that neither of us currently live in. Can the rental income be used to qualify for the loan? If so, how does that affect the interest rate and remaining principal?
2. 2) My ex and I sell the duplex.
   1. Since we have owned the property for 5 years and lived in it from 2018-2020, we avoid capital gains tax, correct?
   2. We split the profits.
   3. We pay ~5-6% sellers commission.
   4. In order to buy another property with my proceeds, I will need to get a new loan similar to Option 1 qualifications.

Thank you for your advice in advance. 

[Andrew Garcia]

Hi @Julie Coleman, Below are my answers

1. Refinance option.

     a. Yes

     b. If you are going to live in at least one unit, you can do a rate and term primary residence refinance. Your ex's income will not be used to qualify. The interest rate may or may not be lower depending on your current interest rate.

     c. The rental income from one side can be used to qualify for the loan if you live in the other unit. It does not affect the interest rate or principal.

2. Selling option.

     a. If you lived in it for 2 of the last 5 years, you can be exempt from $250k if single and $500k if married. Avoiding it depends on how much capital gains you had.

     b. Yes, you will need to get a new primary residence loan similar to option 1.

Hope this helps! Let me know if I can be of any assistance.