One of the most challenging aspects of dividing marital assets in a divorce is determining what to do with the family home. For most couples, their house is the single largest asset they own. It’s also the least liquid. Unlike a checking account, its value cannot be withdrawn and split on a moment’s notice.
Further complicating matters, the property is usually owned jointly by the couple. Both parties pay a portion of the monthly mortgage and both of their names are usually on the mortgage loan. Naturally, when the couple gets a divorce, questions arise about how to handle the home.
Should one spouse get to continue living in it? If so, should the other spouse receive compensation for his or her interest in the property? Should the house be sold and the proceeds split? What about the tax and credit implications? We’ll address these and other key considerations below. What follows should not be considered legal advice. It is strongly recommended that you contact a divorce attorney before making any final decisions.
“Am I Able To Keep My House?”
If ownership of the property is given to you in the settlement agreement, you are able to keep it. But there are many circumstances in which the family home is not awarded outright to either spouse. Its value may outstrip that of other assets owned by the couple. Hence, giving it to one person may be considered unfair. In such cases, the couple must negotiate who gets to stay, whether that person will pay the entire mortgage, and many other details.
“Who Gets To Keep The Family Home?”
This question extends from the previous question. The decision regarding who stays in the home is ultimately determined by the settlement terms agreed upon by you and your spouse. There are myriad factors to consider. For example, do you have minor children who live in the home? Do both of you work, or is one spouse a stay-at-home parent without an income? Should alimony from one party be used to pay the mortgage while the other party stays in the home?
These are complex issues that are dependent on your unique situation. To that end, advice from a financial advisor can be valuable.
“If I Stay, Do I Have To Pay My Husband/Wife?”
If you decide to stay in the home, and your husband or wife has equity in it, you will likely need to pay him or her. This is essentially a buyout of your spouse’s interest. You’ll need to determine how much the property is worth, and then calculate the dollar value of your spouse’s equity.
For example, if your home is worth $250,000, and your spouse has a 40% interest, you would need to pay him or her $100,000 to assume ownership. This can be approached in a number of ways. You can refinance the property; take out a loan; liquidate other assets; or give other assets to your spouse in exchange for his or her interest in the home.
“How Can I Tell How Much My House Is Worth?”
One way to assess the value of your house is to call a professional appraiser. Depending on its size and the area in which you live, the appraisal can cost $400 or more. If you’re preparing for a battle in divorce court, you may be required to take this approach.
A less costly option is to call a real estate agent who handles properties in your neighborhood. This person should have a fair grasp of the prices fetched by similar houses in your area. He or she will be able to evaluate the worth of your home based on that experience. It’s a good idea to invite a few real estate agents to your home for this purpose. Having multiple estimates will give you a better idea regarding your house’s value.
“How Will Leaving The House Affect My Credit?”
If you have agreed to leave your home and allow your spouse to continue living in it, realize that your credit can potentially be harmed. Unless you and your spouse refinance the mortgage loan under his or her name alone, your credit can be affected as a result of missed payments. Lenders care little about divorce settlements. They care only about whose name appears on the loan agreement. If your name is on the loan, you are responsible for making timely payments, even if you no longer live on the property.
There are countless solutions to splitting the family home when getting a divorce. A bit of creativity and a willingness to be flexible with one another can help divorcing couples avoid an unnecessary and costly court battle.