In the majority of marriages, the house is the most valuable asset. Therefore, it’s no surprise that the first question many couples ask is who gets the house in the divorce? Since no two divorces are the same, it’s impossible to say what will happen to your home during a divorce. However, you may find that certain options, such as selling your home, are more in line with your financial goals. Most couples going through a divorce decide to either sell their house, or have one person keep the house and buy the other spouse out. Both options have their pros and cons. Who gets the house in the divorce will likely depend on your future plans and your finances.
To calculate your equity, you take the value of the home and subtract the amount you still owe. This includes the primary mortgage and any other loans associated with the property, such as a second mortgage or a home equity line of credit. If one person is planning on keeping the house, you will need to have an agreed upon appraiser appraise the home. Depending on the housing market, your home may be worth more, or less, than the outstanding debt on the property. The value of the home could change the amount of equity you have in your home, especially if the price of the house has changed dramatically. Though it doesn’t always happen this way, couples should begin the divorce process with the expectation that equity will be split evenly. Therefore, knowing how much equity you have in your home can influence whether or not the house will need to be sold during the divorce.
Selling the House
In most cases, couples choose to sell the home and split any remaining proceeds from the sale. This is because, in order to “divide” a house, it must either be sold, or the party staying in the house will have to buy their spouse out of their interest in the property. If you were to sell the house, you’d most likely split the equity down the middle, meaning you each get $100,000. However, if you chose to buy your spouse out of the house, you’d have to give them $100,000.
Keeping the House
If you are going to buy your spouse out, you will most likely have to pay them half of the net equity. For example, if your house is worth $300,000, and you owe $100,000 on the house, you have $200,000 in equity. That means the person keeping the house would have to pay their spouse $100,000 for their half of the equity. This is most often accomplished by refinancing the property. If both spouses are on the mortgage, the person keeping the court will need to refinance the house in order to get their spouse’s name off the mortgage. The party keeping the house will likely be provided a period of time to complete the refinance and pay them their portion of the equity. Typically, the payout of their portion of equity is paid at the time of refinance. Another option may be offsetting the equity with assets or taking marital debts. However, this option is likely only for couples who have assets of substantial value such as cars, boats, motorcycles, etc.
When You’re Upside Down on the House
If you’re upside down on the house, the most common solution is to sell the house and split the debt. Another option is for one person to take the house and the other party offset their portion of the debt with other assets or debt. In today’s housing market, this is not a case we generally encounter. However, if one party can afford the mortgage on the house, and they aren’t planning on moving any time soon, it may not be a bad idea to keep the house, even when you’re upside down on it. If you’re in this situation, make sure to consult your attorney before making decisions on whether or not to sell a home you’re upside down on.
When You Can’t Agree on Selling the House
Though it doesn’t normally happen, if you and your spouse cannot come to an agreement on whether or not to sell the home, the court will have to decide whether or not you’re going to sell the home. It isn’t uncommon for judges to order the house be sold, especially if you cannot prove that you are able to afford the home. Also, courts will not necessarily order your spouse to pay alimony just so you can stay in the home. The party that wants to stay in the house will need to establish that they can afford the house after it’s refinanced and pay their spouse half of the equity. The court may consider other extenuating circumstances when determining what to do with the marital residence, particularly where there are children.
When the House is Paid Off
If your house is already paid off, you can sell the house and split the difference, or you can buy your spouse out. Most of the people who have paid off homes are older, and some may even be retired. Buying your spouse out of the home may mean taking out a mortgage. If you’re retired, this may not be financially beneficial. However, if your new mortgage is less than what you’d pay finding a new house, it may be a good idea to keep the house. It’s probably best to consult your attorney and financial advisor before making decisions on selling your home later in life.
Making the Right Decision
If you’ve got questions about who gets the house in the divorce, our attorneys at CoilLaw are here for you. We can walk you through all your options regarding the house, and help you make the decision that’s best for you and your financial goals. If you’re ready to start the divorce process, contact CoilLaw today.