Real estate, and more specifically, the marital residence, frequently is the largest asset to be divided in a divorce. The financial constraints of a divorce will often mean that the parties have limited choices on how to deal with the house in the divorce. If the residence you share with your spouse is marital property, both you and your spouse are entitled to a share of the equity. The question then becomes, how do you divide the equity and the house?
The most straightforward answer is often to just sell the house and split the equity. This is an especially appealing option when the parties can agree on basic issues such as the listing price for the house, the realtor to use, and how to divide the household bills until the house sells.
If one spouse wants to keep the house, then another option is for the house to be awarded to that spouse. Frequently, the way this is handled is for the spouse keeping the house to refinance the home in his or her own name and use proceeds of the refinance to “buy out” the other spouse’s share of the equity.
Another possibility is allowing one spouse to remain in the house without refinancing. This is typically an ill-advised decision, although it seems simple at the time of the divorce. This is because if your name is still on the mortgage, you are still responsible for that mortgage payment, regardless of the divorce. In other words, if your spouse stops making mortgage payments, you are still contractually obligated to make sure that the payments are made. You are still on the hook for the mortgage payments, even if you no longer live in the house. Your former spouse’s inability to make the mortgage payments can end up ruining your credit. Therefore, as with most issues in divorce, it is best to make a clean break if at all possible.
Also of note is that the divorce court cannot order the mortgage company to do anything. It is not possible, for example, for the divorce court to order the mortgage company to remove one spouse’s name from the mortgage. The court can only order the spouses to take specific action. The court cannot modify the contractual obligation between the spouses and the bank.
If you have questions about what will happen to your house in your divorce, let us answer them for you. Contact us today at (253) 272-9459 for an appointment to talk about your divorce.