Major durational alimony changes went into effect July 1, 2023 in Florida. These changes will have profound implications for divorcing spouses who need alimony payments to qualify for mortgage financing.
Under Florida’s new alimony law, if the marriage is less than 3 years, a spouse is entitled to no durational alimony. If the marriage is at least 3 years and less than 10 years, absent exceptional circumstances, an award of durational alimony cannot be more than 50 percent of the marriage length.
Can an Alimony Recipient Even Qualify for Financing?
When drafting marital settlement agreements for either one spouse to buy out the other’s equity in the marital home or to purchase a new home, how might the new limitations on durational alimony hamper the recipient’s ability to accomplish the agreement?
Underwriting Guidelines: The 6/36 Rule
First, consider underwriting guidelines for using alimony payments as a borrower’s qualifying income. A mortgage applicant must show proof of receipt of 6 months of court-ordered payments before initiating a mortgage application. Then, the applicant must show that the payments will continue for at least another 36 months from the application. At the Divorce Lending Association, we call this the “6/36 rule.” Thus, there needs to be at least 42 months of alimony payments if they are to be used as income for mortgage qualification.
Short-Term Marriages and the 6/36 Rule
So how will the new alimony law affect certain alimony recipients? The new award amounts for short-term marriages stipulate that if the marriage is greater than 3 years and less than 10 years, the award of durational alimony is no longer than 50% of the marriage. Going back to the 6/36 rule and understanding there needs to be at least 42 months of payments to be considered qualifying income, any marriage that is less than 7 years (84 months) will present a problem: the duration of payments will be insufficient for underwriting guidelines.
Allied Professionals Can Help Divorcing Couples Find Other Solutions
Changes to alimony laws highlight the importance of including a Certified Divorce Lending Professional (CDLP®) as a member of the professional divorce team when real property and mortgage financing are present.
As divorce teams explore options with divorcing couples to meet settlement goals, allied professionals can help identify potential conflicts between divorce settlement options, mortgages, underwriting practices.
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