If you and your spouse are divorcing and you own a home, you have some options. If you want the property, you will need to pay your spouse for their equity share. One way to accomplish this is to trade assets or property as part of the divorce process.
Splitting up your debts, assets, and possessions fairly and equitably will be part of your divorce. It can be very contentious, but ideally, the parties should consider this a business transaction. The two of you will start a new personal life, and to accomplish that, you will need to split your financial lives in a way you can both accept.
You can reach a resolution or litigate the issue and have the judge decide. If that is where the case ends up, you will give up controlling the outcome, which will cost you more time, energy, and money.
How Can I Make This Work?
If you prefer to live in your marital home, you will need to pay your spouse for their ownership interest.
Often during divorces, the spouses agree and disagree on a mix of assets. You could offer your spouse something that is clearly yours and give up your rights to assets that are contested. Consider the following scenarios:
- The two of you have $100,000 in home equity. To buy out your spouse’s $50,000 share, you could give up your $50,000 interest in a joint investment account or a 401k.
- You are claiming spousal support. You may give it up or reduce it in exchange for your spouse’s home equity.
Ideally, your spouse will be open to swapping assets to cover their home equity, and it will be enough to cover the whole amount. If that is not the case, you could pursue a cash-out finance but keep in mind the following:
- You would refinance your mortgage, but in your name only.
- This is only an option if you qualify for the loan and can afford the new monthly payments, which will probably be higher than what the two of you now pay. You are also subject to the going loan rates, which are going up and down.
- If you are the sole owner, you must also be able to afford all the other costs that come with home ownership, such as taxes, utilities, maintenance, repairs, and insurance.
- The refinance gives you access to the home equity, which you can use to pay your spouse.
Given the number of divorces, this is nothing new for mortgage companies. However, if this is your first divorce, it is new to you. Refinancing a mortgage during a divorce will probably involve substantial potential financial liability, so this should not be decided upon quickly without advice from an attorney.
What Could Be My Plan B?
As much as you want the house, depending on your post-divorce income and assets, buying out your spouse could make you house-rich and money-poor. You may end up with not enough money to go anywhere or do anything, and being one major house repair away from living on credit cards. Your spouse could buy you out, or the two of you could sell the house and split the profit. The money you receive could be your down payment on a more affordable house.
Who Will Own Your House is Just One of Many Issues
If you are considering getting divorced and concerned about where you’ll live afterward, contact us here at Karen Ann Ulmer, P.C., so we can answer your questions and discuss how we can help you.