With so much changing during a divorce and after it, it is only natural that both parties try to hang on to the familiar as much as possible. This is why property division is often so contested, especially when it comes to ownership over the family home. Deciding who gets to keep the home is a difficult one during a divorce, but is one that should be taken with a level head, because of tax and other financial ramifications in the long run.
The first step a divorcing couple needs to take is determine the value of the house by getting it appraised. Each party may want to get their own appraiser. Equity is what is left after the couple subtracts what they owe on the house from the value of the house. Equity is what the couple has to divide, and there are three ways to do this:
- Selling the house is the cleanest way to divide the property. After settling all the debts related to the property, the couple divides the money that is left. Not only does the couple get the money outright, they no longer have to engage one another in house related discussions.
- One ex becomes the sole owner of the house. This is possible when one party refinances the mortgage in their own name. In this case, the house is no longer a joint asset, the outstanding mortgage is replaced with a new loan, and equity is freed up to buy out the other party. One of the reasons this can be tricky is because qualification for the new mortgage depends on income, which will be affected by the divorce. The best way to approach this is to figure it out whether one can qualify as soon as possible.
- For various reasons, selling the house is not always possible. Whether the market is not a seller’s one or one party does not have the money to buy the other out, couples often find themselves sharing the house, at least in the short run. Additionally, parents prefer to retain ownership of the house to provide stability for the children or because it is in a good school district.
Every situation requires a different property division solution and an experienced attorney can work one out with interested parties.