Bit of trouble

Investor · New York, TX · Member since 2026 · 2 posts · 3 votes

Recently divorced, took a job out of state, ex wife missed 8 payments on mortgage thats dropped my credit (she got the house from divorce) and I need to get back on my feet. How can I take equity from one of my rentals with under 600 score and the late payments on history

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Tim SwierczekPro Member

Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes

1mo

Quote from @Richard McIntosh:

This is the type of situation you want either private money or Hardmoney if you’re gonna keep the property, but it might be better to sell paid on debt and recover.

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Tim SwierczekPro Member
Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
1mo
Quote from @Richard McIntosh:

Recently divorced, took a job out of state, ex wife missed 8 payments on mortgage thats dropped my credit (she got the house from divorce) and I need to get back on my feet. How can I take equity from one of my rentals with under 600 score and the late payments on history

This is the type of situation you want either private money or Hardmoney if you’re gonna keep the property, but it might be better to sell paid on debt and recover.
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Josh C.Pro Member
Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes
1mo
If she got the house why do you have the mortgage still?
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- Ken M.
  Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
  1mo
  Quote from @Josh C.:
  
  If she got the house why do you have the mortgage still?
  When you buy a house on both incomes, the underwriting is done using both incomes.
  
  Financing is very different from ownership.
  
  The lender won't release either party until the loan is paid off which usually means the house has to be sold or if one party has enough income & credit they can refinance. But there is no incentive to refinance if the mortgage rate is low, unless it's court ordered.
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Jimmy LieuBusiness Member
Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
1mo
Quote from @Richard McIntosh:

Recently divorced, took a job out of state, ex wife missed 8 payments on mortgage thats dropped my credit (she got the house from divorce) and I need to get back on my feet. How can I take equity from one of my rentals with under 600 score and the late payments on history
Sorry you're dealing with that. With a sub-600 score and eight recent mortgage lates, a conventional cash-out refi is probably going to be difficult right now, but I wouldn't assume the equity is completely inaccessible. I'd look into non-QM/DSCR lenders that focus more heavily on the rental's income and equity than your personal income; some programs have more flexibility with lower scores and mortgage lates, although you should expect lower leverage, higher rates, and possibly more reserves. Another thing I'd do immediately is review the divorce decree and your credit reports to see whether the mortgage was supposed to be refinanced or otherwise removed from your responsibility. A divorce decree by itself generally doesn't remove your obligation to the lender if your name remained on the original loan, so that piece is worth sorting out before applying everywhere and taking additional credit pulls. For the rental, I'd gather the current value, mortgage balance, monthly rent, monthly PITIA, and how much cash you actually need, then have a few lenders run the scenario before deciding whether pulling equity makes financial sense. You may find that waiting and rebuilding your score gives you substantially better terms than forcing a refinance today.
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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1mo
Did you use an attorney as part of the divorce? Typically if one gets the property and other on mortgage you would sell it or have them refinance it out so this does not happen. Who is on the deed and who is on mortgage ?
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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
1mo
Quote from @Richard McIntosh:

Recently divorced, took a job out of state, ex wife missed 8 payments on mortgage thats dropped my credit (she got the house from divorce) and I need to get back on my feet. How can I take equity from one of my rentals with under 600 score and the late payments on history

You can still obtain financing however you may be limited in LTV. Perhaps 50 LTV max
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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
1mo
Financing options with a sub-600 score and recent late payments are really a lending question, talk to a broker who works with lower credit scenarios, DSCR loans in particular can sometimes work around personal credit since they lean more on the property's cash flow, though rates and terms will reflect the risk.

Where the tax side matters, once you do pull equity out through a HELOC or cash-out refi, keep those funds traced clearly to whatever they're actually used for, if it's going toward getting back on your feet personally rather than into another investment property, that interest generally isn't deductible against your rental income, tracing rules require the funds to be used for investment or business purposes to get that treatment. If part of the equity goes toward improving or repairing the rental itself, that portion could still qualify, so keeping personal use and property use separated in how you deploy the funds matters for what you can actually deduct later.

Given the divorce, if the mortgage on the house she received was ever in both your names, those missed payments hitting your credit doesn't necessarily connect to a tax issue directly, but if there's any unresolved liability or you end up making payments on her behalf, get that documented, informal payments toward a debt you're not on the hook for post-divorce can create complications depending on how the settlement was structured.

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