People often save for years to be able to buy a home or they become homeowners because they inherit a property from their parents. They may then invest heavily in modernizing and updating the property. Many married couples dedicate a significant portion of their income toward their mortgages or home improvement projects. The equity they accumulate at the property where they live may represent their single biggest personal asset.
Those preparing for divorce often worry about how the end of a marriage might affect their home ownership status or their ownership interest in the property. What typically happens with a marital home when a couple divorces?
Every case requires unique solutions
There is no one approach for handling home equity and home possession that is effective for all couples. Factors including the age of the spouses, their individual income, their credit scores and whether they have children can influence what they decide to do with the home where they live.
Some couples readily recognize that neither spouse can likely afford the home on their own. They may choose to sell the property and share the proceeds of the sale with one another. Other times, either spouse could potentially retain the home. In such scenarios, conflict is likely.
Spouses may end up fighting over who stays in the home and how they compensate the other spouse for their share of the equity. Typically, the person staying at the home has to pay the other for their share of home equity, although that can look vastly different from one case to the next. Some people refinance the mortgage and withdraw equity. Others offset the value of the home with other assets.
People may need to try to detach emotionally from the marital home and instead look at the matter from a practical perspective. Retaining the home doesn’t necessarily mean winning the divorce or even retaining more of the marital estate. It can leave people saddled with debt, especially if they must refinance to compensate their spouses for equity.
People need to consider whether their history in the home could impact their enjoyment of the property later and whether they can maintain the home without the help of a spouse. In scenarios where spouses cannot reach an agreement about the marital home, they may have to have a judge interpret the equitable distribution statute to determine who stays and how they handle home equity.
Having realistic expectations while preparing for divorce can help people limit their expenses and frustrations throughout the process. A marital home does not need to be resolved via a winner-take-all outcome when couples divorce, and a nuanced approach to addressing a home may be beneficial.