This episode is the second part of a four-part series on handling the home during divorce.
Often, people going through a divorce have a strong emotional attachment to their home. The first episode will help you objectively assess the financial reality of your situation.
This episode focuses on what to do when one spouse is going to keep the marital home, whether it is you or your spouse. It will help ensure that you are educated and informed about your financial options.
If you or your spouse are going to keep the marital home, you will need the know the answers to these questions:
1) Who owns the home?
Sometimes, a client thinks that they own the home, but find out that their name is not actually on the title. It is important to make sure that you know whose name is on this form. The title is a legal document, which clarifies whether or not you own the home or part of the home. If your name is not on the title, that will be a big factor in the negotiations about your assets. There is another document called a deed, which is used to transfer the title from one person to another.
There is an added complication: marital property versus separate property. You can have a situation in which only one person’s name is on the title, but the house is considered 100% marital property. In that case, each spouse owns 50% of the house. You could also have a situation in which you only own 30% because of the way the house has appreciated over time. You will need to know your state’s laws about marital property (in terms of the timing of the home purchase, and whether it increased in value during the marriage).
2) Whose name is on the mortgage?
If you and your spouse jointly own the home and the mortgage, there will only be one way to remove one person’s name from the mortgage: paying it off. Both you and your spouse have a contract with your lender, and the only way to end that contract is by selling or refinancing it.
If your spouse is keeping the house, they will have to refinance it in their name. This situation can add complications, because the bank will examine their income and their credit history and decide if they can afford the mortgage as a single person. If your spouse does not qualify, your name will still be on the mortgage. You will not want to give up ownership of the home until it is certain that your spouse is refinancing.
3) How do you remove a spouse from the ownership of the home?
There are two options: a quit claim deed or an interspousal transfer deed. It is important not to give up ownership of the house if your name is on the mortgage.
There are a lot of considerations when deciding whether one spouse keeps the home during a divorce. There are benefits and disadvantages to everything in divorce, so you need to figure out what makes sense for your situation.