When couples get a divorce, one of the biggest questions beyond child custody is regarding who will take possession of the family home. A house is often one of the biggest assets in a divorce, and its mortgage may be one of the couple’s biggest debts. Determining the division of and what related action to take with the home can create a lot of stress.
Do Divorcing Couples Have To Sell Their Home?
In a divorce, couples are not obligated to sell their home, but it may be the smartest option in some circumstances. Although judges may order a home to be sold in certain cases if there are financial loose ends that need to be wrapped up, it is not a foregone conclusion, and one spouse may be able to keep the house depending on the couple’s financial situation and the way the home was financed.
How Is Ownership Of A Home Determined?
According to the Maryland Marital Property Act, family court judges are required to equitably divide the marital property of a couple. Marital property refers to everything that either party acquired during the marriage, with an exception only being made for an inheritance or gift. This means that for most couples, the marital home is considered part of the marital property that must be divided equitably in the divorce.
There are, however, cases where a home may be considered to be the separate property of one spouse. This may apply if one spouse owned the home before the marriage and the couple avoided using marital funds to cover repairs, improvements and mortgage payments. This separate property will be awarded to the rightful owner.
A judge will weigh several factors to determine whether a property that began as a separate party was commingled with marital property, so it is best to consult a family law attorney for specifics.
How Is A Home That Is Considered Marital Property Divided?
If the home fits the definition of marital property, a judge may choose one of three main options.
1. Sell The Home
The court may order the couple to list the home for sale and use the proceeds to pay off their mortgage and any home equity loans. Whatever is left will then be divided among the parties as a part of the equitable division of their marital property.
2. Use and Possession
In cases where children are living in the marital home, a court may decide to give the custodial parent what is known as use and possession of the family home for as long as three years after the divorce has been finalized. After this time has passed, ownership will revert to the person whose name is on the title.
3. Transfer The Title
A court may order the title to a jointly owned home to be transferred to just one of the spouses. The receiving spouse will typically be responsible for refinancing it to pay off the mortgage and remove the other spouse’s name.
Buying A House From A Spouse in Divorce
When one spouse is awarded a house in a divorce, the other spouse will usually then receive a share of the equity in the home in the divorce settlement. Although some people refer to this as a divorce house buyout, it does not technically involve selling the house to the spouse. Instead, it entails placing the net fair market value of the home on one spouse’s side of the equity amount and balancing it with assets on the other spouse’s side.
Determining Home Equity
Keep in mind that “equitable” is not the same thing as “equal”, so this will not always be a 50/50 division. However, to balance both parties’ interests, equally dividing the equity in the couple’s home is often considered a good starting point. This involves calculating half of the fair market value of the home and then subtracting the outstanding balance of any debt attached to it, such as a mortgage or home equity loan.
Once the equitable portion of the other party has been determined, the party who receives the home will refinance it at an amount that is sufficient to cover the other party’s equitable portion upon the finalization of the divorce. However, the spouse may also choose to offset the equity with bank accounts or investment funds or by agreeing to take on a higher amount of joint marital debts.
Request A Consultation With The Maryland Family Law Attorneys
The financial decisions made in a divorce can have a lasting impact on the futures of both spouses. Therefore, it is important to discuss the question of home equity with a divorce attorney as early in the process as possible to understand the options that are available. To learn more about the division of property or to speak to a divorce attorney, contact SIEGELLAW today to schedule a consultation.