When a couple is divorcing, disposition of the marital home can be one of the biggest issues of contention. The house is often the parties' most valuable asset, but the home mortgage may be the couple’s largest liability. Issues arise when one of the parties wants to keep the house.
In the best case scenario when one party wants to remain in the family home, the parties can agree to a buyout. The party staying in the house either trades other marital assets for the house or refinances the home, taking out equity to purchase the other party’s share. Regardless, the person selling his/her interest will want to be removed from the mortgage, which can only be accomplished by refinancing the mortgage.
If there is a mortgage, the retaining party will have to refinance the balance in his or her own name. In most cases, couples have financed a home using both of their incomes to qualify for the loan. Depending on how much of the loan has been paid, the retaining party may find it difficult to qualify on one income alone.
If the retaining spouse will receive child support or spousal maintenance, this income is not immediately includable in income for the debt-to-income ratio requirements for loans. Most banks will require proof of least six months of such income, while Fannie Mae requires three years of continued receipt of such income.
It gets even more complicated when children are involved. A court could find that it is the best interest of the children to remain in the marital home. This is particularly the case when the children are, for instance, entrenched in high school or in a community. In these cases, one or both of the parties must cover the cost of maintaining the house and, at some fixed point after the children leave, the house is sold and the proceeds divided.
It is not always wise for the economically dependent spouse attempt to retain the home. As any homeowner knows, homes can be a bottomless money pit. The costs of maintaining the home servicing the mortgage and paying the living expenses could easily exceed the maintenance and child support payments.
In short, retention of the marital home by a party can range from easy to impossible depending on the amount and attributes of the marital assets and the parties’ respective earning capacities. There are many considerations too numerous for this space. If retaining the home is a goal of someone contemplating divorce, competent legal counsel should be consulted very early in the process.
New York and New Jersey divorce attorney Daniel Clement has been guiding clients through divorce and family disputes for over 30 years.
He understands your concerns and fears. He wants to help you overcome the uncertainty and empower you to make informed decisions that achieve your goals.
If you are considering divorce, please download the free e-book The Divorce Process: What to Expect to learn more about the process.
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