One of the biggest assets most divorcing couples have is their home — and it’s also often the most problematic issue to settle.
How do you divvy up the house in a divorce?
What you ultimately can do depends a lot on how much equity you have in the home and your personal desires.
If you have little equity, selling the home might be difficult to do unless the real estate market in your area is really hot. If you have any equity at all, it will probably go for realtor’s fees, but that will at least get you out of the joint obligation.
Your other choices, if you’re low on equity, include:
— Cohabitation might work, if you’re on good terms with your ex, you both have good boundaries and you can agree to make it work until you can afford to sell.
— Renting it out, which should at least cover the mortgage and maybe provide a little extra income you can both split.
— Allowing one spouse to remain in the property and refinance it out of the other spouse’s name (if that’s financially possible for either spouse).
If you are upside-down financially with the house, owing more than it’s worth, you can still make use of the other options or do something a little more drastic:
— You can quitclaim the property to the spouse who can afford to keep the mortgage current, forgoing the right to any equity that’s built afterward. That still leaves you on the hook if your ex stops paying the mortgage, so this requires a leap of faith that they’ll live up to the bargain. Include an agreement about how long they have to refinance and get your name off the property or sell.
— You can sell the property at a loss. This is known as a short sale. Keep in mind that you and your spouse will still remain liable for the remainder of the mortgage and will have to absorb the loss out of your own pockets.
While definitely not financially advantageous, they’re viable options if you absolutely want to be done with the place (and your ex) as soon as possible, no matter what the financial cost.
For more specific advice on how to handle marital property division, an attorney can help.
Source: Legal Reader, “What Happens to Your Mortgage Liability during Divorce,” Jess Walter, March 24, 2017