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Dealing with the home during divorce

During a divorce, one of the major property division issues is resolving what to do with the couple's home. Couples can usually sell their home and divide the proceeds, allow one spouse to keep the home or both agree that both spouses keep the house.

Before deciding on any of these options, the couple should each have an independent appraisal performed on the value of their home. Once the couple agree on the home's value, they calculate its equity by subtracting what is owed on it. Once the equity is calculated, the spouses resolve it with one of the three available options. The least complicated method to divide equity is to sell the house. The couple divide the remaining money after retiring the mortgage and paying taxes and debt related to the sale.

The second option is for one spouse to become the sole owner and refinancing the mortgage. This has the advantages of removing the other spouse from the mortgage so that the house is not a jointly-held asset, pays off the old mortgage with a new loan and frees up money to buy off the other spouse's equity share. However, the one spouse must qualify for a loan based on one income. This poses obstacles because the couple originally qualified for their mortgage on both of their incomes. Couples should work on resolving this financing before their divorce.

Finally, both spouses can keep ownership of the house. This option should be considered when the couple owe more than the house is worth, they cannot afford separate homes or they do not want to disrupt their children's lives. Usually, one spouse moves out but continues to pay the mortgage when the children are in school. The couple ultimately sells the house or one of the spouses buys their ex-spouse's equity.

Spouses can take other steps. Instead of paying each other cash, they can exchange retirement funds, vehicles or other assets. An attorney can help a spouse review these options and take other steps to assure financial stability at the end of the marriage. They can also help assure that a fair and reasonable divorce decree is issued.

Source: Nerdwallet, "How to split home value in a divorce," Holden Lewis, Nov. 22, 2017

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