People frequently say that home is where the heart is. Home is also where people tend to invest a significant portion of their income. Married couples might spend as much as a third of their income each month paying their mortgages.
They may also spend money making repairs or improvements to the property. Homeownership helps people acquire equity, which can be a major contributor to their overall net worth. Additionally, the cost of a mortgage is often comparable to or even less than renting a living space depending on the location.
When married couples decide to divorce, the home where they live is one of the resources that can be a concern for both of them. What typically happens with marital homes when couples decide to divorce?
Spouses usually split their home equity
Most married couples share ownership of their homes. Even if only one spouse has their name on the title, the use of marital income to pay the mortgage and maintain the property often makes it a marital asset. In some cases, one spouse stays in the home while the other finds a new place to live. Other times, spouses may agree to sell the home.
In either scenario, they typically need to reach an arrangement that allows them to fairly and reasonably divide the equity that they have accumulated in the property. They can achieve that by refinancing the mortgage and withdrawing equity. However, doing so is not always realistic depending on the principal balance owed and the income of the spouse staying in the home.
Sometimes, it is necessary to use other resources to balance out the value of home equity when people divorce. Marital debts can also play a role in that process. Spouses don’t necessarily have to achieve a 50/50 split of their assets provided that the outcome of the property division process is fair. They have the option of reaching their own agreement, and if they cannot, then a judge can apply state statutes to their home and their other resources.
In certain, rare situations, spouses sometimes agree to continue joint ownership of their marital home. They may do that to wait for the market to improve, to allow their children to remain in the same school district or to finish repairs on the property. Such arrangements typically require thorough written agreements to protect the interests of both spouses.
Having appropriate expectations for property division matters can help people prepare for an upcoming divorce. Those who are able to set aside their emotions and focus on their long-term financial recovery can often achieve terms that truly work for them, given their current circumstances.