To sell, or not to sell...your home during a divorce.

Originally published 03/06/2023

If you are divorcing and you share a home with your ex, there are many things to consider. For example, one party may want to stay in the home and not move or find a new place to live. This can only happen if:

1) The person that wants to stay in the home is able to refinance and get the other party off the mortgage loan,

OR

2) Both parties agree to stay on the mortgage. 

However, there can be problems with each of these options.

In Option 1, let's say Wife wants to stay in the marital home, but she does not make as much money as Husband. If she is getting spousal support from the divorce, it could be added to her income to help (possibly) qualify her for a refinance and, therefore, to remove Husband from the mortgage loan. However, Husband is still entitled to his share of equity in the home, and Wife will still owe him his half of the home equity, just like it would be divided if the parties sold the property. Now, if Husband owes wife a lot of cash from her portion of other community assets (retirement account, savings, etc.), he could use it to offset his equity in the home. To detail this example, if Wife is awarded $200,000 from Husband's 401k and savings accounts, and the equity in the home just happens to be $400,00, Husband's portion of the equity in the home would be $200,000 – making the home equity exchange a wash (where neither party must pay the other out-of-pocket). But, if there aren't any other assets, where is Wife going to come up with $200,000 to buy out Husband’s equity, if they don't sell the house??

In Option 2, let’s say Wife does not qualify to refinance and take over the mortgage on her own, so Husband agrees to stay on the mortgage, so she and the kids don't have to move. Now Husband needs a new place to live; but he might not qualify to purchase another home if his name remains on the mortgage to the marital home. If Husband’s debt-to-income ratio is not capable of getting him approved for two large mortgages, it does not make sense for him to remain tied to the mortgage on the marital home.

Sometimes the best option is to sell the home because it may not be financially equitable for one party to stay. If you are in a situation like those described above, it’s never a bad idea to consult an experienced divorce lawyer, real estate agent, and/or financial planner to help you make decisions for your unique situation.

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