Specialty tag(s): Dividing the Marital Home, Property Division
Clayton Bryant | August 8, 2024
One of the most important tasks divorcing couples face is dividing their property, particularly if the principal asset is the marital home. According to the Survey of Consumer Finances, the primary residence is the largest asset for households across many different age groups, except for those ages 55 to 64, who often have significant business interests as well. For this reason, the home’s equity is one of the biggest considerations when deciding whether to keep or sell the property during a divorce.
Home equity is the difference between the market value of the real estate and the amount still owed against it on a mortgage. Equity in a shared home is a unique asset; it involves shared value but is also characterized by joint debt. Deciding how to split home equity in your divorce can certainly be a challenge, but with a strong grasp of your options, you will have a better chance of coming to a resolution with your former spouse.
Many couples assume that the best way to deal with home equity in a divorce is to sell the house, pay off the balance of the mortgage, and split up any remaining proceeds. With today’s interest rates and real estate market, however, this is not always possible or desirable. That’s why it’s essential to be aware of alternatives to splitting home equity in a divorce.
If one spouse wishes to keep the house individually, a divorce agreement can be structured so that the party who gives up their interest in the home equity during the divorce is compensated with other assets. For example, one party might give up a stake in a retirement account in return for sole ownership of the home.
Normally, refinancing the loan under the name of just one spouse can be accomplished if the mortgage is not underwater and the spouse staying in the home has sufficient credit and income on their own to qualify for a refinance. If the spouse staying in the home is not able to qualify for a refinance, the mortgage may be left as it is, but this is very risky; under such circumstances, the credit reports of both borrowers will be negatively impacted if mortgage payments are missed.
There are workarounds if the mortgage is left in the name of both former partners. For example, your divorce settlement can state that if the one who keeps the house misses a mortgage payment, the house must be sold or refinanced. Whatever the arrangements, the party keeping the house should always preemptively prepare a comprehensive post-divorce budget to determine whether they can realistically handle not only the cost of the mortgage but also home maintenance, utilities, and taxes.
If you, your former spouse, and your respective family law attorneys cannot come to an agreement about what to do with your home equity in a divorce, a court will decide for you. However, it is almost always faster and less expensive for everyone involved if a settlement can be reached.
While distributing home equity after divorce is never simple, it does provide opportunities for creativity and compromise. Whether you want to keep your house or just get your share of the divorce equity split transformed into a more liquid asset, an experienced family law attorney can help create solutions that work for you. Talk to a family law attorney about divorce and house equity today to learn more.
With a distinguished career spanning more than 15 years, Clayton Bryant expertly handles all aspects of family law, such as trusts and estates, child custody, and property division. As a veteran litigator, Clayton boasts extensive jury trial experience and is also a certified mediator. His clientele includes professionals and their spouses, parents prioritizing their children’s well-being, and mid-life individuals seeking a fresh start.
To learn more about home equity and divorce, contact Clayton Bryant at our offices in Fort Worth or Granbury or by calling 877-219-8299.
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