Divorce involves the breakup of financial as well as emotional ties between the couple. One major financial tie that binds many couples is their home. While it may have constituted the couple's largest asset, in divorce it can constitute their largest headache. Even if your state's family law code doesn't require you to sell your home and divide the equity, economic realities may make it hard for either one of you to keep it.
Even though you and your spouse are divorcing, you are still legally responsible for paying the mortgage if your names are on the promissory note. Until you sell your home or the mortgage is refinanced out of your name, your credit will suffer if the mortgage doesn't get paid. Because of this, deciding what to do with the former marital residence can take on a high degree of urgency after you separate.
Keeping the Marital Home
Selling the former marital residence isn't always necessary. At times, one spouse is interested in keeping the home and is able to pay for it. If your ex's name appears on the mortgage for a house you want to keep, you will need to refinance it to remove him from it. Until the mortgage is refinanced, it will show up on both your credit reports.
Compelled to Sell
Some states allow a court to order a sale over the objection of either or both spouses, but this varies by jurisdiction. Regardless of the law, keeping the home isn't always an option. Many times, couples needed both incomes to qualify for their mortgage and neither can qualify for refinancing on his or her income alone. If you cannot refinance, you may be forced to sell. Refinancing may also prove difficult if the value of your home has declined below what you owe on it, as banks are generally reluctant to refinance "upside-down" mortgages.
Sometimes, you can borrow enough against the home to "buy out" your spouse's equity. If you can refinance but can't get enough for a buyout, you still have options.You may be able to trade other marital assets that would otherwise come to you in exchange for your ex's equity in the home. You could also consider conveying or trading separate property that your ex would otherwise not be entitled to. Additionally, you could make mutually acceptable payment arrangements that would continue until your ex is fully compensated.
When children live in the home, some parents are reluctant to uproot them from their schools and neighborhood so they choose to keep the marital home for a specified time period, such as until the last minor child goes to college. After that, they sell it. Couples also consider deferred sales when a home's value has dropped, especially if neither couple qualifies to refinance the mortgage and the couple does not want to sell at a loss.