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Reaffirming a mortgage during bankruptcy means you agree to keep paying your mortgage despite the bankruptcy, but the consequences of reaffirming a mortgage may vary. The pros include maintaining homeownership, retaining any built-up equity in your home and potentially improving your credit score through continued on-time payments. However, the cons involve losing bankruptcy protection for […]

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","

Whether you’re entering bankruptcy or coming out of it, a financial advisor can help you get your finances on track. Find an advisor today.

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Understanding Reaffirmation Agreements

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A reaffirmation agreement is a legal document used in bankruptcy proceedings that allows debtors to keep certain assets, such as a home or car, by agreeing to remain liable for their mortgage debt and continue making payments on the associated loans. This agreement waives the discharge of specific debts that would typically be erased in bankruptcy.

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This can be beneficial for those who want to keep their home and continue their mortgage payments as if the bankruptcy never occurred. By reaffirming, the debtor continues to be responsible for the mortgage debt, and the lender maintains the right to foreclose if payments are not made.

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Signing a reaffirmation agreement, which typically happens in Chapter 7 bankruptcy, can help rebuild credit over time, as timely payments are reported to credit bureaus. However, it also means that failure to make payments can lead to foreclosure, just as it would outside of bankruptcy.

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Consequences of Not Reaffirming a Mortgage

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Not reaffirming a mortgage means the loan remains part of your bankruptcy discharge, relieving you of personal liability for the debt. However, this does not mean you automatically lose your home. As long as you continue making payments, the lender typically will not foreclose.

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Yet, the consequences of not reaffirming the mortgage include the potential inability to refinance or modify the loan in the future. Without reaffirmation, the lender may not report your payments to credit bureaus, limiting your ability to rebuild credit.

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Additionally, failing to reaffirm can leave you in a precarious ownership position. While you may remain in your home if payments are made, any default can lead to quick foreclosure, with fewer options for negotiation compared to a reaffirmed mortgage. This scenario underscores the importance of understanding both sides of the reaffirmation decision – and its consequences.

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Pros of Reaffirming a Mortgage

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Reaffirming a mortgage during bankruptcy proceedings offers several key benefits that can positively impact your financial future. These advantages include the ability to maintain homeownership, retain equity and potentially improve your credit score.

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Maintaining Homeownership

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For many, the most compelling reason to reaffirm a mortgage is the ability to maintain homeownership. Keeping your home provides a sense of continuity and stability for your family. It also allows you to continue benefiting from the personal and financial advantages of owning property, such as tax deductions on mortgage interest.

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Retention of Equity

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Reaffirming a mortgage allows you to retain any equity built up in your home. This equity can be a valuable financial asset, offering a source of funding through home equity loans or lines of credit. Additionally, it provides the potential for financial gain if the property value increases over time.

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Potential for Improved Credit

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One of the significant benefits of reaffirming a mortgage is the potential for improved credit. When you reaffirm, your on-time mortgage payments continue to be reported to credit agencies, helping to rebuild or maintain your credit score. This can be advantageous for future borrowing needs or securing better interest rates on other loans.

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Cons of Reaffirming a Mortgage

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When you reaffirm a mortgage during bankruptcy, you agree to continue being liable for the debt. This means that despite the bankruptcy, you commit to making payments on the mortgage as if the bankruptcy never happened. This approach comes with significant potential drawbacks.

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Loss of Bankruptcy Protection

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Reaffirming a mortgage removes the protection that bankruptcy offers regarding your home loan. If you face difficulties in making payments post-reaffirmation, you will not have the option to discharge the mortgage debt again. This leaves you vulnerable to foreclosure without the safety net that bankruptcy originally provided.

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Long-Term Financial Commitment

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A reaffirmed mortgage binds you to a long-term financial commitment. If your property’s value declines or your financial situation changes unfavorably, you remain obligated to the mortgage terms. This lack of flexibility can be particularly disadvantageous in an unpredictable economic climate.

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Deficiency Judgments

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Defaulting on a reaffirmed mortgage while underwater – meaning, you owe more than what the home is worth – could lead to a deficiency judgment. This legal obligation requires you to pay the difference between the auction sale price and the outstanding mortgage balance. The deficiency judgment can lead to wage garnishments and bank account levies.

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How to Request a Reaffirmation Agreement

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If you’re planning to reaffirm your mortgage, it’s advisable to consult with your bankruptcy attorney during this process. They can review the reaffirmation agreement to ensure it aligns with your best interests. Your attorney can also help you understand the long-term implications of reaffirming your mortgage.

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Here’s how to request a reaffirmation agreement:

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Contact your mortgage lender and inform them of your intention to reaffirm the mortgage.
The lender will typically prepare the reaffirmation agreement document for you.
Once you receive the reaffirmation agreement from your lender, you need to file it with the bankruptcy court. This involves submitting the signed agreement to the court before the discharge of your bankruptcy case.
You may need to attend a court hearing to confirm the agreement.

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Bottom Line

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While reaffirming a mortgage can help maintain homeownership and potentially enhance credit scores, it also carries substantial risks, such as losing bankruptcy protections and enduring long-term financial commitments. You must weigh several important factors, such as your ability to afford the payments and your desire to ultimately keep the property. Also, consider what other options are available for dealing with your debt, such as a loan modification. Understanding the advantages and disadvantages, as well as the potential consequences of not reaffirming your mortgage, is essential for making an informed decision.

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Tips for Avoiding Bankruptcy

","$3a","

Photo credit: ©iStock.com/PixelsEffect, ©iStock.com/Gam1983, ©iStock.com/gpointstudio

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Real estate crowdfunding platforms have become a popular way for everyday investors to gain exposure to real estate. This type of investment doesn’t require the capital and know-how needed to purchase entire properties, making it a potentially simpler avenue for diversifying your portfolio. These platforms allow individuals to pool their funds with other investors to back various real estate projects, from residential developments to commercial ventures. Today’s market of real estate crowdfunding platforms includes companies like Fundrise and CrowdStreet, each with their own focuses, investment requirements and fees.

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You can also consider working with a financial advisor to explore additional ways to invest in real estate and other assets.

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What Is Real Estate Crowdfunding?

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Real estate crowdfunding is a method of raising capital for real estate projects. Individual investors contribute small amounts of money toward a common goal, enabling them to participate in real estate opportunities that might otherwise be out of reach due to high costs or exclusive access.

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The process works similarly to other forms of crowdfunding, but instead of supporting a product or cause, investors are backing a tangible asset: real estate. Through online real estate crowdfunding platforms, investors can browse and choose real estate projects that align with their financial goals, whether they’re looking for short-term returns through fix-and-flip properties or long-term gains through rental income and property appreciation.

","

Most platforms offer two types of investments: equity-based and debt-based. With equity-based investments, investors own a share of the property and earn a portion of the rental income or profits when the property is sold. Debt-based investments involve lending money to the property developer, with returns generated through interest payments.

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Real estate crowdfunding allows investors to diversify their portfolios across multiple properties and locations, reducing their reliance on any single property. But like any investment, real estate crowdfunding comes with risks, including the potential for market fluctuations, delays in project completion or loss of capital if a project underperforms.

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Real Estate Crowdfunding Platforms

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When choosing a real estate crowdfunding platform, consider factors such as minimum investment requirements, fees and the types of projects offered. Here are some popular real estate crowdfunding platforms to explore and compare:

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Fundrise

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Fundrise is one of the most well-known real estate crowdfunding platforms and is accessible to users who are over the age of 18, have a permanent U.S. residency, a valid US tax ID and file taxes in the U.S. The platform offers a range of real estate investment options, including residential and commercial properties, and provides access to diversified portfolios through its eREITs (electronic real estate investment trusts).

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The minimum investment on Fundrise can be as low as $10, making it an attractive option for new investors. One downside, however, is that liquidity can be limited, as funds are intended to be a long-term investment.

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RealtyMogul

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While RealtyMogul offers opportunities to both unaccredited and accredited investors, certain opportunities are only available to the former. The platform has investment opportunities in both commercial and residential real estate. The platform focuses on larger, institutional-grade properties, and investors can choose from debt or equity investments. Investment minimums typically range from $25,000 to $35,000.

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One unique feature of RealtyMogul is its option to invest in REITs, which provide a diversified portfolio of properties.While the opportunities can yield attractive returns, RealtyMogul may be better suited for more experienced investors with more capital or a higher risk tolerance.

","

CrowdStreet

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CrowdStreet is a real estate crowdfunding platform that specializes in commercial real estate projects. The platform is open to accredited investors and offers direct access to a variety of real estate deals. Investors can choose from single-property offerings or invest in diversified funds. The platform also provides in-depth information about each project, allowing investors to conduct thorough due diligence before committing. The minimum investment is typically $25,000, making CrowdStreet more suitable for investors with significant capital.

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PeerStreet

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PeerStreet focuses on real estate debt investments, offering investors the opportunity to fund real estate loans and earn interest payments. The platform is open to accredited investors and requires a minimum investment of $1,000. PeerStreet allows investors to customize their portfolios by choosing loans that match their risk tolerance and financial goals. One advantage of PeerStreet is its relatively short investment terms, which range from one to 36 months. However, since the investments are debt-based, returns are limited to interest payments rather than property appreciation.

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Groundfloor

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Groundfloor is a unique platform open to accredited and non-accredited investors, with a focus on short-term real estate loans. Investors can get started with as little as $10, making it one of the most accessible platforms in the real estate crowdfunding space. While the platform’s low minimum investment is appealing, it’s important to note that the projects tend to carry higher risk, as they are typically tied to short-term renovations and sales.

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Frequently Asked Questions About Real Estate Crowdfunding

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What Is the Minimum Investment for Real Estate Crowdfunding?

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The minimum investment varies by platform. Some platforms, like Fundrise and Groundfloor, allow investments as low as $10, while others, like RealtyMogul and CrowdStreet, may require a minimum of $25,000 or more. Investors should choose a platform that aligns with their available capital and financial goals.

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Do I Need to Be an Accredited Investor to Participate?

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Not all real estate crowdfunding platforms require accreditation. Platforms like Fundrise and Groundfloor are open to non-accredited investors, while others, like CrowdStreet and PeerStreet, are limited to accredited investors who meet specific income and net worth requirements.

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How Long Will My Money Be Tied Up in a Crowdfunding Investment?

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Investment timelines vary depending on the platform and the specific project. Some platforms, like PeerStreet, offer short-term investments with durations of one to 36 months, while others, like Fundrise, may require longer commitments of several years.

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Is Real Estate Crowdfunding Safe?

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As with any investment, real estate crowdfunding carries risks. While it offers the potential for attractive returns, there’s also the possibility of losing your investment if a project fails. Investors should conduct thorough research, diversify their investments and only invest funds they can afford to lose.

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Bottom Line

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Real estate crowdfunding platforms provide an accessible way for investors to diversify their portfolios and participate in the real estate market without owning entire properties. While this investment avenue offers lots of opportunity, don’t overlook the risks involved. If you’re interested in real estate crowdfunding as an investment opportunity, there are several platforms that can help you get started. The right one for you depends on your financial goals, risk tolerance and available capital.

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Tips for Investing in Real Estate

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Photo credit: ©iStock.com/pixelfit, ©iStock.com/WendellandCarolyn, ©iStock.com/Svetlana123

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A retirement mortgage caters to seniors who are no longer earning a regular salary. It allows them to access home equity or finance a home purchase with repayment terms that are tailored to their retirement income. Lenders will assess these mortgages based on the borrower’s retirement income, credit history and the value of their assets, […]

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","

If you are considering a retirement mortgage, a financial advisor can help you determine how this type of loan fits into your overall financial plan.

","

Is It Possible to Get a Mortgage as a Retiree?

","

Yes, provided that lenders can see enough proof that you can make regular payments. They will also want to evaluate all sources of income to determine your ability to repay the loan. Retirees can draw from IRAs, 401(k)s or annuities to provide additional income to meet lender requirements. However, there are tax implications, so consider consulting a tax professional or financial advisor before doing this.

","

Lenders also assess the retiree’s debt-to-income (DTI) ratio, which compares monthly debt payments to gross monthly income. A lower DTI ratio and a strong credit score indicates better financial health and increases the chances of mortgage approval. Retirees should be prepared to discuss their health status and provide evidence of sufficient savings or insurance to cover potential healthcare costs, as lenders may worry about long-term financial health. Demonstrating a comprehensive financial plan that addresses these concerns can reassure lenders. Proof of income is often established by preparing statements for the following:

","

Withdrawal statements from your 401(k) or IRA
Annuities
Social Security, disability, or veteran’s benefits
Pensions
Stock dividends
Savings interest

","

Types of Mortgages Available to Retirees

","

","

Just as with other financial decisions, retirees should shop around for the best mortgage terms. Different lenders can offer varying rates, fees and qualification criteria. Here are four types of mortgages that retirees can choose from:

","$56","

Alternatives to Retirement Mortgages

","

Alternatives to retirement mortgages can include reverse mortgages, downsizing, home equity loans and using retirement savings or investments to fund housing needs. Here’s a closer look at four common options:

","$57","

Tax Relief

","

Seniors may be able to take advantage of exemptions, reductions, or deferrals on property taxes, which aim to make homeownership more affordable during retirement.

","

Various states offer tax breaks for seniors that depend on age, income and residency. Benefits can also include higher standard deductions and tax-free income from certain retirement accounts.

","

Bottom Line

","

","

Retirement mortgages come in many shapes and sizes, but retirees need to demonstrate that they have steady income and long-term financial stability in order to satisfy lenders. Cash-strapped retirees can also explore refinancing options, using their existing home for equity or enlisting the help of a cosigner. The U.S. government may also provide tax relief or favorable loans through the USDA, FHA, or VA. Ultimately, retirees may want to consult with a retirement advisor to talk over what options might work for their financial plan.

","

Tips for Mortgages

","$58","

Photo credit: ©iStock.com/FG Trade Latin, ©iStock.com/Wavebreakmedia, ©iStock.com/PeopleImages

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Divorce is a challenging and emotional time for anyone, and the process often involves making significant decisions about personal and shared assets. Selling a home during a divorce can be a practical option for many couples, allowing them to liquidate their most significant joint asset and move forward separately. However, the process will require you to take into account several key things to ensure that both parties can transition as smoothly as possible. A financial advisor can help you take stock of your assets during a divorce and plan for your financial future after your marriage ends.

","

What Happens to a Couple’s Assets in a Divorce?

","

During a divorce, couples must face the challenging process of separating what was once shared, from the family home to the smallest piece of jewelry, each possibly carrying a weight of memories and emotions. The emotional attachments to these assets often cloud the practical necessity of their division, making the process even more daunting.

","

The laws that govern how assets should be divided in a divorce can vary significantly depending on the state. Therefore, you should understand the difference between community property states and equitable distribution states.

","

In community property states, assets acquired and debts incurred during the marriage are typically divided equally, as they are considered to be owned by both spouses. On the other hand, equitable distribution states strive for a fair division, which may not always mean equal. A judge in an equitable distribution state may take into account the length of the marriage, the contributions that a non-working spouse makes and the financial outlooks of both spouses, to determine what’s equitable.

","

Types of assets commonly divided in divorce include:

","

Marital homes
Investment portfolios
Business ownerships
Retirement accounts
Personal property, such as vehicles and jewelry
Accumulated debts

","

Steps for Selling a House During a Divorce

","

","

Selling a house during a divorce will involve multiple steps. These can include reaching a mutual agreement to sell the home, preparing the home for sale, listing the property, accepting an offer, settling the mortgage and finally dividing any remaining profits. Here’s a general breakdown:

","

1. Agree to Sell

","

The initial and perhaps most important step in selling a house during a divorce is establishing a mutual agreement between both parties. This agreement can help ensure a smoother transition and reduce the chances of costly and protracted legal disputes. The decision to sell the marital home is frequently motivated by factors like an inability to divide the asset practically or the mutual desire for closure and the ability to move forward with their lives independently.

","

Open dialogue is essential to reach a consensus that respects the interests of both individuals. But, should a dispute arise regarding the sale, legal intervention may become a necessity. In this case, mediation or arbitration can serve as an effective pathway to reach an agreement and thus avoid additional conflict and a court proceeding.

","

2. Get the Home Ready to Sell

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Preparing the home for the market is a multifaceted process that involves making repairs and enhancements, as well as presenting the property in its best light to prospective buyers. It’s important to declutter and depersonalize living spaces, and employ the services of a professional stager, if helpful. The selection of neutral color palettes and the execution of minor updates can also contribute positively to the home’s marketability.

","

3. Hire a Real Estate Agent and List the Property

","

When listing the property, you’ll likely want to choose an experienced real estate agent who can navigate through the complexity of a divorce with neutrality and professionalism. The agent’s role is to represent interests from both spouses equitably and develop a listing strategy that balances the urgency of the sale with the objective of securing a fair market price. The strategy should account for the local real estate market conditions and the financial goals of each individual.

","

4. Accept an Offer and Close the Sale

","

Evaluating offers in the context of a divorce requires you to consider of various factors, including the timing of the sale, the division of proceeds and potential contingencies that may impact the sale’s conclusion. You may want to maintain clear lines of communication and seek legal counsel to guarantee that the interests of both spouses are defended and reflected in the negotiations.

","

The closing process involves a series of legal and financial transactions that must be precisely coordinated. This typically includes a final property inspection, the execution of numerous legal documents, the distribution of closing costs, and the transfer of ownership title.

","

5. Settle the Mortgage

","

If there’s an outstanding mortgage on the property, it must be settled as part of the sales process. The proceeds from the sale are typically used to pay off the mortgage balance. It’s important to communicate with your lender early in the process to understand any penalties or processes associated with paying off the mortgage early. Clearing the mortgage ensures that both parties are released from their joint financial obligation, paving the way for the division of any remaining proceeds.

","

6. Divide Proceeds

","

The final step in the process is dividing the proceeds from the sale. This division should be based on the agreement made during the divorce proceedings, which may consider factors like each party’s contribution to the purchase and upkeep of the home. In community property states, however, proceeds are typically split equally.

","

Alternatives to Selling a House During Divorce

","

While selling the house is a common solution, there are alternatives that may better align with the unique circumstances and emotional landscape of those involved in a divorce. Engaging with legal and financial professionals can help you understand the full scope of each alternative path.

","

Buy Out Your Spouse

","

A buyout occurs when one spouse pays the other their share of the home’s equity, becoming the sole owner. This option is especially appealing if one party wishes to stay in the home, perhaps to maintain stability for children or to keep the home in the family. Financially, it requires that the buying spouse can afford the buyout, either through personal savings, loan qualification or through an agreement on the division of other assets. The key benefit here is continuity; however, it demands a clear and fair valuation of the property and an assessment of each party’s financial future post-buyout.

","

Rent Out the Home

","

For couples who are inclined to keep the marital asset and tap into potential rental income, turning the home into a rental property is a viable option. This option generates income, which can be particularly helpful if the divorce has strained finances. It also buys time to wait for a better real estate market or for personal circumstances to change.

","

The process begins with understanding the responsibilities and financial implications of becoming a landlord, which includes property maintenance and tenant management. Divorcing couples should consider their readiness to either manage the property themselves or delegate to a property management firm. Additionally, there are tax considerations and impacts on cash flow that need to be taken into account. This option is not just about the additional income but also involves assessing one’s capacity to handle the obligations that come with being a landlord.

","

Delayed Sale

","

Opting for a delayed sale can align with personal timelines and long-term plans, providing a grace period before parting with the marital home. This choice can be motivated by various factors, such as awaiting market improvement or reaching a significant milestone for children. This can minimize disruption for the children during a critical transition period. The implementation of a delayed sale involves drafting a legal agreement that outlines the specifics of the delay, division of expenses, and the predetermined timeline for the sale.

","

This agreement can help ensure that both parties are committed to the home’s upkeep and allows for financial planning in anticipation of the sale. While this strategy may offer benefits, it’s dependent on both parties’ willingness to cooperate, and it should be noted that delaying the sale does not guarantee a higher return in the future.

","

Can a Judge Order You to Sell During a Divorce?

","

","

Yes, under certain conditions, a judge does indeed possess the authority to mandate the sale of a house during a divorce. This decision is usually made within the broader process of asset division, aiming to ensure a fair distribution of marital property between the spouses.

","

The determination of whether a home must be sold typically hinges on several key factors. First and foremost is the categorization of the home as marital or separate property. Marital property includes assets acquired during the marriage, regardless of whose name is on the title, and is subject to division. Separate property, acquired before the marriage or through inheritance or gift, may be exempt, although this can become complicated if the value of separate property has been significantly commingled with marital assets.

","

Judges also consider the financial circumstances of both parties, including their ability to maintain the home independently. If neither spouse can afford the mortgage or upkeep on their own, the court may deem a sale necessary. Additionally, the presence of children and the desire to minimize disruption to their lives can influence a judge’s decision.

","

In cases where a sale is ordered, the judge will outline the terms, including the timeline and division of proceeds. This process can be complex, involving appraisals to determine fair market value and negotiations over who covers ongoing expenses until the sale is finalized.

","

Bottom Line

","

Selling a home during a divorce will require careful consideration of emotional, financial and legal factors. Whether in community property states where assets are split evenly, or in equitable distribution states where fairness can dictate a different outcome, the process demands transparency and cooperation between parties.

","

Tips for Navigating Divorce

","$6b","

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