Deciding whether and how to keep the house is often one of if not the biggest issue a spouse has in their divorce case.
Frequently it is the most substantial asset a couple owns and sometimes the only one which can be readily converted into cash without any kind of tax penalty.
In the final analysis, the decision that must be made is whether you keep the house, your spouse keeps the house or the property is sold and the equity divided between the parties.
This article will explore the analysis someone should go through in a divorce case when facing this decision.
One possibility is that you keep the house, either by an agreed settlement or after a trial.
Generally this means that you would be awarded the property and you would be solely responsible for the debt attached to that property.
One of the key issues that should be considered is whether post-divorce you can afford it.
Often it is simply not possible for either spouse to handle the payments and related expenses on just one person's income.
You should carefully analyze whether your income will be sufficient to allow this.
Another issue that must be addressed is whether your spouse will require that the mortgage be refinanced in order to remove their name.
Again, depending on your financial circumstances, you may have difficulty qualifying for the mortgage on your own and terms may not be nearly as favorable as what you have in the current mortgage.
The bottom line is that you need to carefully evaluate this important financial decision before making a rash emotional commitment to a financial obligation which may later be impossible to live up to.
A second possibility is that your spouse keeps the house, again either by agreement or after a trial.
Conversely, this would mean they would be awarded the property and would be solely responsible for payment of the debt on that property.
If you are the spouse not receiving the house it is very much preferable that the mortgage be refinanced so that your name is removed from that debt.
This is important because if your ex were to default under the current mortgage at a later date it could dramatically impact your credit rating and even expose you to a potential lawsuit.
The only way to avoid this scenario is to have the debt refinanced so that your name is removed.
A final possibility, and one that is often the best option, is that the property is sold and the net proceeds (sales price less cost of sale and any indebtedness) are split between the parties on some percentage basis.
This option avoids the refinance issue because the debt is paid off at the time of divorce.
Also, neither spouse is placed in the position of attempting to afford the monthly expense of a house that was purchased based on circumstances that are no longer accurate (dual income household, larger home needed for entire family, etc.
).
In the majority of cases this option is usually the best fit, although circumstances do vary.
As you can see deciding how to handle the marital residence in a divorce case is a complicated.
Whether you decide to keep the residence, let your spouse have the residence, or sell the home and split the proceeds, the situation needs to be carefully analyzed.
As long as you go into the situation thinking with your head and not your heart you'll make a good decision and do just fine.