What Happens to Your Home in Divorces

Divorce is a difficult situation which opens up many emotional and financial issues which need to be resolved. One of the most important issues is what to do about your home. There are many questions you might be asking at this time, we, at Kahane Law Office, are here to help. Let’s first break down some of the basics.

“I think I want to stay in my home…what do I need to keep in mind?”

First, take into consideration the size of the home, utilities, payments and family needs. Will the familiar surroundings bring you comfort and emotional security, or unpleasant memories? Do you want to minimize change by staying where you are, or sell your home and move to a new place that offers a fresh start? Does staying in the home truly make sense? You will likely now be entirely responsible for the house payment, taxes, insurance, upkeep, maintenance and other related bills. Your household income may be decreasing, and your overall expenses may be increasing if you are subject to a court order for spousal or child support. It is important that you are aware and thorough in determining what your actual expenses will be in keeping and maintaining the home on your own.

“My spouse is entitled to share in the equity we have in our home…how is this handled?”

The equity in the home needs to be determined by an appraiser – call us if you need a recommendation and referral. The appraised value less the eventual costs of selling (commissions and seller closing costs), less any joint financial obligations related to the property (mortgages, secured credit lines) equals the equity to be split between the parties (in most cases). Any money you or your spouse contributed to the home from your own pre-marital assets must also be accounted for in determining the final division of equity.

If you choose to stay in the home, when it comes to mortgage financing, you have two options to pay your ex-spouse. You can either refinance your current home to get cash out, or you can obtain a new second mortgage or home equity loan. This is where you will want the advice of a trusted licensed mortgage professional.

Even though you may now be qualifying for the loan without a spouse’s income – with your own good credit and income, you can usually qualify on your own. Often, child support and alimony is viewed as stable income and can, in most cases, be used to help support the mortgage application.

“What if I am the one leaving the home?”

It is important to know that even though the divorce agreement awarded the home to your spouse, you are still obligated for this debt in the eyes of the mortgage company.

Many people assume that by filing for a divorce and removing themselves from the title, they are no longer responsible for the mortgage. A divorce agreement may only eliminate your name from the title of the property, but not necessarily from the mortgage. This is something to be aware of and we always recommend getting your own legal advice to make sure you are properly protected.

“What if we both decide to sell the home?”

If you and your ex-spouse have made a mutual decision to sell your current home, it is important to work together with a good real estate professional to maximize your return. Differences aside, you should both be present when a listing contract is put together and both be consulted on all potential offers. Consult a qualified real estate agent.

“If I want to buy another home – am I going to be out of luck while I am still listed on the old mortgage?”

Consult with your lawyer as to whether or not it is advisable to purchase a new home before your divorce is final. Contact us and we can identify any issues to resolve that might slow the process. Remember that in most situations, child support and alimony can be used to support the mortgage application but must be properly documented. Even if you are still listed as a co-borrower on the mortgage for the prior home, if the divorce agreement states that you are not obligated for the mortgage, many mortgage programs will allow you to be qualified without this obligation. However, every situation is different and it is best to give us a call to discuss your circumstances prior to making any purchases.

“What if I do want to purchase another home before the divorce is final?”

Get advise you can trust. Discuss the potential pitfalls with your lawyer. Your spouse may present an obstacle to this process if the details of the divorce have not been finalized. Without the final divorce agreement (or at least a signed separation agreement), many lenders are reluctant to proceed. With prudent planning, we can work together to manage the challenges presented and hopefully make the process as painless as possible.

The best advise we have is that you consult a licensed professional for your real estate, mortgage and legal needs.

For more information contact Jeff Kahane at Kahane Law Office or 403-225-8810.