Often, the largest asset a couple has is the house that they live in together. If your house was purchased during the marriage, then it is considered a marital asset which must be divided if you and your spouse get divorced. This is true regardless of whether both of your names, or just one of your names, are on the deed.
If there is a mortgage, a line of credit, or other debt secured by the house, then the outstanding balance of that debt must be subtracted from the value of the house in order to determine the equity that can be divided between you and your spouse in a divorce. Continue reading to learn who gets the house in a divorce.
In Pennsylvania, most property acquired during the marriage is marital property subject to equitable distribution either by the Court or by private agreement. When couples divorce, the property is divided based upon what is equitable.
There is no presumption that marital property will be equally divided. Rather, the Court will divide property based upon statutory factors, including:
Generally, there are two ways for you and your spouse to divide the equity in a house during a divorce:
1) Sell the house and divide the net proceeds
2) One spouse refinances the debt secured by the house (if any) to remove the other spouse from the obligation and buys out the other spouse’s interest in the equity.
Which option to choose depends on whether either of you wants the house, and whether either of you can afford to keep the house. If neither of you wants the house or you can neither refinance the mortgage nor afford the costs associated with the house alone, then the house is typically sold.
If one of you wants to keep the house, then that spouse would need to obtain a new mortgage in an amount large enough to satisfy the existing debt and pay to the other spouse an amount equal to his or her equitable share of the equity.
Alternatively, one spouse can refinance the mortgage in an amount sufficient to pay off the existing mortgage and give the other spouse other assets that would offset his or her equitable share of the equity. At that point, you would execute a new deed reflecting the new ownership.
While it is possible for you and your spouse to remain co-owners of a house following a divorce, it is usually not advisable as the mortgage would remain in both of your names, putting the non-occupying spouse at risk if the occupying spouse falls behind on the mortgage or utilities. Also, the way you hold your interest in the house changes upon a divorce.
If you want to keep a house in a divorce, you need to be sure that you have sufficient income and savings in order to qualify for a mortgage on your own in an amount to not only pay off the existing debt, but also buy out your spouse’s share of the equity, or there are enough other assets that you could give your spouse to offset his or her share of the equity.
You also need to be sure that your income is sufficient enough to pay the monthly mortgage payments, the taxes, insurance, and maintenance associated with the house on your own.
If you are not employed, or employed part-time, you should secure full-time employment, as lenders will want to see a steady income to be sure that you will be able to meet the obligations associated with the house.
In making this decision, making a budget can assist you with determining what the monthly expenses associated with the house will be, and whether your income is sufficient to meet those expenses, together with your other expenses of daily living.
If you are contemplating divorce and you and/or your spouse own a home, you need to seek the advice of an experienced divorce attorney who can counsel you on your options so that you can make informed decisions about the house, as well as the other assets.
The team of family law attorneys at Johnson Duffie have many years of experience assisting clients navigate this difficult time.
Contact the Johnson Duffie Family Law Team.
Author: Amy L. Owen
Part of the Johnson Duffie Family Law Team