Tag Archives: Mortgages

What Happens to the House in Divorce

Our divorce clients have posed many questions with regard to what happens to the house or marital residence during the divorce.  We are often asked, does the house have to be sold?  What if one party wants to retain ownership of the home?  What happens to the existing mortgage loan?  Of course every case has its own set of facts,  however there is an analysis which can be done in most cases.  For instance, the parties should compare the approximate present value of the home when compared with the amounts owed on all mortgage loans, including second mortgages and  home  equity lines of credit.  The parties must examine whether either spouse will have sufficient income after the divorce to pay the monthly carrying charges on the home.  If one party can afford the monthly payments then it is important to examine what it will cost to rent a similar home in the same area.  If one party wants to retain ownership of the marital residence, it will probably be necessary to obtain an appraisal.  Often the parties will agree on a neutral real estate appraiser to ascertain the value of the home.  It may be possible for one party to be  able to retain title to the marital residence by relinquishing ownership of other marital assets of comparable value.  Often, the spouse that is giving up title to the marital residence insists that his or her name be removed from the existing mortgage loan.  Usually in order to  remove one party’s name form a mortgage loan it is necessary to re-finance the existing mortgage.  Sometimes neither party  is capable of buying out the other party’s interest in the marital residence, however,  the parties want to continue ownership so that the children  can continue to attend the same school.  The parties may make an agreement whereby the marital residence will be listed for sale at a specified date in the future or upon a child graduating from school.  It is possible to insert language in  the divorce settlement agreement that  sets the future date for selling the marital residence.

There are many other possible complicating factors concerning the marital residence.  For instance, what happens if the proceeds from the sale of the marital residence are not sufficient to cover the outstanding balance owed on the mortgage loan?  The parties may have to examine the option of a short sale.  If one spouse owned the home prior to the marriage it is  often a complex issue to determine  the extent that the other spouse may share in the equity of the residence.  Another complex issue occurs when one spouse used their separate property (inheritance money, gift money, personal injury money or money owned prior to the marriage) as a down payment to purchase the residence or for improvements to the residence.  With financial and emotional issues of the home burdening the parties it is often the most difficult issue to resolve in a divorce case.