In divorce agreements, it is common to see language such as:
“Spouse A shall refinance the mortgage within 90 days and remove Spouse B from liability.”
On paper, that sounds simple.
In practice, it often fails.
As mortgage professionals working alongside collaborative attorneys and financial neutrals, we regularly see well-intended refinance provisions unravel — not because someone refuses to cooperate, but because the refinance was never financially viable under lending guidelines.
The Most Common Reasons Divorce Refinances Fail
- Debt-to-Income Ratios Don’t Support the Loan
Post-divorce budgets differ dramatically from pre-divorce budgets.
Even if the payment appears affordable on a cash-flow worksheet, mortgage underwriting follows strict debt-to-income ratios that may produce a different result.
- Self-Employed Income Is Calculated Differently
This is one of the most misunderstood areas in divorce planning.
Attorneys and financial professionals often evaluate income based on gross business revenue or owner draws.
Mortgage underwriting does not.
For self-employed borrowers, we use:
- Net income after expenses
- Add-backs (when allowable under guidelines)
- Two-year averages (in most cases)
This can significantly reduce qualifying income compared to what appears on a tax return summary or financial affidavit.
A refinance that seems feasible using gross income may not qualify when evaluated using underwriter-calculated net income.
- Support Income Is Not Yet Usable
For conventional and VA financing, lenders typically require:
- A documented history of receipt (often six months)
- Consistency
- Three years of continuance from loan closing
If deadlines are set before those requirements are satisfied, the refinance may be structurally impossible.
- Equity and Reserve Requirements
Buyout structures increase loan balances.
Loan-to-value limits may restrict options.
Additionally, many programs require post-closing reserves. Asset division during divorce can unintentionally eliminate the liquidity required for approval.
The Collaborative Opportunity
Refinance provisions fail not because of bad intent — but because mortgage feasibility wasn’t analyzed early enough.
A pre-settlement underwriting review allows the team to:
- Set realistic timelines
- Structure viable buyouts
- Identify alternative options
- Avoid post-decree surprises
Case Study
We had a client that was getting ready to sign the divorce decree…it was a collaborative case. The client sent the decree to me prior to signing. Upon review we noticed that the total income would not support the refinance. In this case the divorce client was also getting support payments for a total of 10 years. We were not far off…the solution was to front end load some of the support payments and reduce the overall term of the payout. The attorneys and the client reviewed the suggestion and were able to make the numbers work and the client was able to get the home refinanced and complete the divorce.
Mortgage strategy integrated early strengthens the durability of the final agreement.
About the Author
Dave Jamison is a divorce mortgage strategist and co-owner of Rainbow Mortgage Inc., an independent mortgage brokerage licensed in Minnesota, Florida, and North Dakota. With more than 26 years in residential lending—including 13 years as an underwriter for Fortune 500 mortgage institutions—Dave brings deep, practical expertise to complex divorce-related real estate matters.
What sets Dave apart is his underwriting foundation. Rather than approaching cases from a sales perspective, he evaluates them through the lens of how loans are actually approved—income calculations, debt ratios, reserve requirements, and documentation standards. This allows him to assess feasibility early in the divorce process, helping prevent refinance provisions that later fail and ensuring agreements align with real-world lending guidelines.
Dave and his wife, Gale, founded Rainbow Mortgage Inc. in 1999, initially serving borrowers with complex financial situations. In 2004, he began specializing in divorce mortgage planning, applying his expertise to support attorneys, mediators, and financial neutrals. Since then, he has spent more than two decades helping collaborative teams structure realistic refinance timelines, evaluate buyout options, and avoid post-decree mortgage breakdowns.
He is particularly skilled in analyzing self-employed income, support income, and multi-property scenarios—areas where legal and financial assumptions often diverge from underwriting standards. Known for his calm, direct, and non-adversarial approach, Dave provides clear, objective guidance that supports durable agreements.
David Jamison
Rainbow Mortgage, Inc.
E: dave@rainbowmortgageinc.com | Ph: 952-405-2090
www.RainbowMortgageInc.com
