Married couples often combine their resources and work together to improve their credit scores, in part, to purchase a home. That way, their monthly payments for housing allow them to accrue equity instead of simply going toward rent.
Couples may devote as much as a third of their income toward mortgage payments every month, and the longer they stay married, the more equity they may have accrued in their homes. When they start talking about divorce, both spouses may worry about their house. Equitable property division rules leave a lot to the interpretation of a judge or the spouses who are divorcing.
What are the most common solutions for addressing a marital home when people divorce?
Continued joint ownership
The least common solution for the marital home involves arranging to own the property jointly even after the divorce. Spouses may want to try a birdnesting custody arrangement if they live in a school district where it is hard to obtain rental homes or when they have children with special needs who don’t handle changes to their routine well.
Other times, spouses may have repairs and improvements half-completed that could significantly increase the sale value of the home. Alternatively, they might aspire to rent the home out as a source of income. Such arrangements are feasible but typically require thorough written agreements to protect both spouses throughout the arrangement and when it ends.
One spouse keeps the home
The most common solution in many divorce scenarios is to have one spouse retain possession and ownership of the home. In that scenario, the spouses have to establish the current fair market value of the property. The spouse who stays in the home has to compensate the other for a reasonable share of equity. They can achieve that by withdrawing equity when they refinance or allowing their spouse to keep other assets. Taking responsibility for more marital debt can also help offset home equity. Spouses may need to think carefully about whether staying in the home is the best solution given their income, credit score and memories associated with the property.
Sale of the home
Sometimes neither spouse has the credit or income to afford a mortgage on their own. Other times, neither spouse feels comfortable living in the marital home after the divorce. Spouses can agree to sell the property and share the revenue generated by the sale. They can also use the funds they receive to pay off marital debts so that they each have a fresh start after the divorce.
Property division matters can often be a major complication for those preparing for a pending divorce. Considering every viable solution can help people establish reasonable goals for property division proceedings.
