Your Finance: Divorce and the marital home
Divorcing couples should map out their property-division plans carefully and have solid legal representation to navigate mortgage contracts.
The question of what will happen to the marital home is one that many divorcing couples face. Indeed, it's one of their top concerns, after worries about the impact of the split on kids and on finances, according to an August survey by the legal site Avvo.com.
Here are some tips to help you answer that question if you're going through a divorce:
Both parties want to sell: If you're selling the home and there are profits to split, it's a relatively straightforward process.
Divorcing couples need to agree to the listing price, a schedule for showing the home and a plan for dividing expenses pending any sale, says Jennifer Brandt, a Philadelphia divorce attorney.
Taxes figure into the equation, too. Check on your exposure to capital-gains tax.
It gets more challenging if the couple doubts the home can be sold profitably.
In this case, selling and taking a loss may be the only option if the divorce is messy and everyone wants to wash their hands of the marriage.
If it's an amicable divorce and both parties want to leave and can afford to, rent out the home and be co-landlords.
One party wants to keep the home: Try refinancing in the name of the person who wants to stick around. If there's equity in the home, this can be a viable option.
"The home will be appraised, and the spouse who keeps the home will pay an 'equalization payment' to the other spouse, which is half of the equity," says Kelly Chang Rickert, a Los Angeles divorce attorney.
"If the inhabiting spouse cannot qualify for this loan amount on his or her own and we are dealing with an amicable couple, we could obtain the loan in both spouses' names," says Gloria Shulman, owner of a licensed mortgage brokerage firm in Beverly Hills, Calif.
After the divorce, you can usually redo the loan -- as long as you can document 12 months of canceled mortgage checks from an individual account.
"The divorced spouse who has moved out of the property can then fall off both loan and title," Shulman says.
If you can't agree: Here, things can get messy. If one person wants to keep the home and the other wants to sell, or if both want to stay, the court may have to intervene.
Several clients of Jacky Teplitzky, a real estate broker in Manhattan, built interior walls in their homes under court order, to separate the separated couple.
That isn't a smart approach to selling a house. In one couple's case, Teplitzky says, "legal fees basically ate their house's profits from the sale."