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Factors that Determine Who Gets the House in a Divorce
There are a number of factors that determine who gets to keep a home in a divorce. The first, of course, is state laws, particularly whether the state is a community property state or equitable division state.
In a community property state, divorcing spouses split assets in half, which can include the equity of a house. In an equitable division state, the judge will split assets fairly. It’s important to note that “fair” may not mean equally or evenly, but fairly for the situation.
There are other factors, as well, such as:
- Who has custody of minor children
- Each spouse’s new financial situation
- Each spouse’s job skills and employability
- Each spouse’s physical and mental health
- How much each spouse contributed to buying the home
- Misconduct during the marriage and divorce process
One final factor, which in some cases could supercede the other factors, is whether the house was bought before marriage and is only in one person’s name. In that case, the house will likely go to whoever actually owns it.
Who Pays the Remaining Mortgage?
If your name is on the mortgage, you still are liable for payments. Payments do not stop during or after a divorce, and it’s important to keep them up. Even if you moved out during the divorce, if you are on the mortgage, you are liable. Late payments, of course, will likely incur fees and lower your credit rating.
You can, however, create a written agreement of who will pay, especially if one spouse is the primary source of income for the household.
One option for divorcing couples is to refinance the loan so one spouse can buy out the other. Basically, refinancing gives access to the house’s equity, allowing one spouse to buy out the other spouse.
For example, if you have $100,000 in equity after owning the home a few years, you can refinance and pay your spouse their half of the equity, or $50,000, to buy them out of the house, thus leaving the house your property, and then take them off the mortgage and deed. This assumes that you have the financial means to continue paying the mortgage, unless terms are also renegotiated. You can find other co-signers, as well, but they will also be liable for the mortgage.
Note that if you use a quit claim deed, your name will be off the deed, but not the mortgage, and thus you are still liable.
How to Remove Your Spouse’s Name from the Mortgage Without Refinancing
While the only sure way of removing a name from a mortgage is to refinance, there are a few other possibilities. One is declaring bankruptcy, and then transferring ownership to the co-signer. This, of course, comes with major credit ramifications, and is usually reserved for dire circumstances.
Second, you can buy out your spouse. Your spouse, essentially, sells their stake in the house to you, making you the sole owner. This only works if the house has built up equity. However, this is not legally binding to third parties, even if it is a stipulation of the divorce decree. In short, the decree might absolve you of any responsibility to the debt, but that does not actually affect your mortgage. If you are still part of the mortgage of the home, you are still liable, unless, as above, there is a refinance of the mortgage.
There is, however, one other option: simply asking your lender. Referred to as a novation or assumption, it’s essentially replacing one debt with another. It’s less hassle than having to apply for a refinance, but it’s also much harder to obtain. As lenders are often reluctant to change mortgages that easily, novations can be somewhat rare. FHA and VA loans, however, may have novation provisions.
What If You Sell the House in a Divorce?
Unless you come to an agreement, a judge will decide who stays in the house if you both decide to sell it — or are forced to sell it — during the divorce. This is usually based on need. Again, factors like who has custody of minor children will come into play.
The judge can assign a real estate agent, or you and your spouse can pick your own. Generally, if you are selling the house, you are both going to want to maximize profits, but who actually works with the agent is up to you. The hardest parts will be agreeing on an agent — it might be best to use the agent who sold you the house, if you liked them and they are available — and deciding on a selling price. This, of course, is why you have an expert helping you. Trying to sell a house without an agent during a divorce is not recommended, as it will only add more stress to an already tense situation. Also, costs and fees are generally split unless agreed to beforehand.
There are a few situations surrounding selling a house during a divorce to discuss. First, the sale can be deferred. A judge might order the house to be sold, but it might not need to happen for a set number of months, or until the youngest child in the family reaches 18 years of age. Or, the judge might allow the sale to wait until a housing market picks up.
Who Gets the Equity?
Generally, who gets the equity is up to state law, as noted above. If only one person owns the home, then the equity all goes to that one homeowner. If it’s a community property or equitable division state, equity will be split up according to those laws. However, that’s not the end of the story. A judge may award shares in the home.
In this case, spouses share rights to the value of the home, but not necessary the liquid equity. For example, instead of actual money, the other spouse might receive other assets to compensate for the cash equity from a house. One spouse may be required to buy out the other spouse’s equity, as in a refinancing situation. Or, one spouse might be given possession of the house to stay in, but only for a certain amount of time, and then be required to sell the house and distribute the assets per the judge’s orders.
How to Keep Your House in a Divorce
Generally, the best way to keep the house in the divorce is to convince your spouse. Simply ask for it in the divorce settlement. If you can come to an agreement without a judge’s order, it will be much easier on both of you. Keeping the house post-divorce, of course, requires you to have the financial situation to keep paying the mortgage.
In short, make sure you have good reasons to keep the house. It might be that you have custody of the kids, and want to keep them in the same school and near their friends, or emotional attachment to the house as you have put a lot of work into it. If you only want to keep the house because that means your spouse doesn’t get it — out of spite, retribution, or revenge — it’s best to just let it go. It will only keep stirring up bad memories and make your situation worse.
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