What To Do With The Marital Home After Divorce

Ferguson & Ferguson

Attorneys at Law

May 28th, 2021

Girl tearing paper heart.

Girl tearing paper heart.

What To Do With The Marital Home After Divorce

If you are getting ready to file for divorce, many of your most pressing concerns likely surround what to do with the marital home. Sometimes, this can seem like a no-brainer, and you both agree that the house is sold and profits split. However, when you have children, one person may wish to stay. This can open up a Pandora’s Box of confusion about how to handle equity and ownership. The following blog post is presented by the team at Ferguson & Ferguson for informational purposes to help you make a more informed decision about your largest asset.

Who keeps the home?

There are no legal requirements on who keeps the marital home. Typically, this is an issue worked out between husband and wife, and it is customary for the primary residential parent to maintain ownership. But this is not always the case. Your Ferguson & Ferguson divorce attorney will provide you the options that make sense for your unique scenario, but here are a few potential scenarios to consider:

One parent keeps the house. As mentioned above, when children are involved, the primary parent tends to keep the home. This means the other spouse must sign a quitclaim deed relinquishing their interest in ownership and equity. If there is a great deal of equity, the spouse keeping the property may have to do a cash-out refinance to compensate the other for financial losses.

Selling for profit. Selling is another popular option, and it is particularly beneficial when there are no children involved. Selling the marital home gives each party an opportunity to move on without a mortgage. One of the first considerations here is how much the home is worth. Before making this decision, it’s a smart idea to evaluate the housing market to see what similar properties are selling for.

Continuing to live together. According to Divorce Magazine, more than one-quarter of separated couples cohabitate together after the dissolution of the relationship. When you own a home together, this may be a temporary solution when finances are a concern. In this scenario, you may continue to pay the mortgage together, but will likely take on more of a roommate relationship, with one spouse paying the other for room and board. Another option here is to turn your home into two separate living areas, such as apartments or a duplex apartments or a duplex.

Qualifying for a mortgage

When one spouse chooses to maintain ownership, and there is still a mortgage on the property, it is likely necessary to refinance. Unfortunately, it is usually the financially disadvantaged spouse (often the wife) that must take on this financial burden. Qualifying for a mortgage may not be easy, but, as Rocket Mortgage explains, some lenders will look at more than a regular income. Other potential sources of income to report to your mortgage lender include child support payments, military benefits, and dividends from stocks and investment accounts.

Keeping the equity

If you are the spouse that plans to keep the home and you would like to keep the equity intact, you may be ordered to compensate your former spouse. If refinancing with a cash lump payment is not an option, you will also need to look at other assets. You might be able to “trade off” equity for stocks, high-value personal property such as jewelry, or retirement accounts. Many financial advisors, however, suggest keeping retirement accounts intact so as not to significantly affect your future financial position.

The takeaway here is there is not necessarily a right way or wrong way to handle housing questions during a divorce. While most parents believe keeping their children at home is the best option, it’s not always possible. Only you and your former spouse know what is right for your situation. Talk to your attorney if you have additional questions about what to do with your home when your marriage is no more.