By Tamara Hoffstatter
So you and your wife bought the home of your dreams! You worked hard and saved to obtain it, and it has everything you ever wanted in a home.
You also have a ton of memories in that house. Memories of happier times between you and your spouse before it all went south. Fond memories of bringing your newborn children home, watching your children grow up in that house, playing with the kids in the back yard, and decorating for the holidays.
You love that house, and you want to keep it. But will you end up with the marital home after your divorce?
Three Marital Home Scenarios
There are three scenarios that could occur regarding your marital home.
- The house will be sold;
- Your wife will keep the house; or
- You will keep the house.
The easiest solution, but often not the most popular, is to sell the house and both parties move out.
If the house is sold, then the proceeds from the sale of the home will be applied to any mortgages or liens on the house, and the remaining proceeds, or equity, will be equally divided between you and your wife.
If the proceeds of sale are not enough to cover the debt on the house, then each of you will be responsible for paying one-half of the remaining debt.
Marital Home Liability Post-Divorce
If, however, one of you ends up keeping the house, consideration needs to be given to the liability that may remain with the spouse who moves out.
The court has the authority to award possession of the home to one of the parties, but the court does not have the authority to discharge the other party from being pursued by the mortgage company for past due payments or deficiency balances.
For example, let’s assume that your wife is awarded the marital home. Language will be included in your divorce decree that makes your wife responsible for paying the mortgage, and language will also be included that states that your wife will “hold you harmless” from the mortgage and will “indemnify you” if the mortgage company goes after you for payment.
However, if your wife does not make the mortgage payments, then the mortgage company can still come after you for those missed payments because the loan note that secures the home still lists both of you as the responsible debtors.
To avoid this and make a clean financial break from the house you should request that the judge order your wife to refinance the home in her name alone. This may be easier said than done because there is no guarantee that she will be able to refinance. After all, the original mortgage was written with both of you listed and with both of your incomes considered.
It is very likely that your wife may not even be able to qualify for the refinance, meaning that you will not be shielded from being pursued by the mortgage company if your wife defaults on the loan.
Other Factors To Consider
Of course there are other things to consider that further complicate what should be done with the home.
If there are children involved, then in an effort to maintain stability for the children, the judge is very likely to award the marital home to the primary custodial parent. This will keep the children in the same familiar residence, in the same school district, in the same neighborhood, and decrease some of the disruption that so often plagues a divorce.
Also, before a home is awarded to one spouse or the other, there should be an assessment of whether that party can afford to make the payments.
Hence, a true decision regarding what happens to the home needs to balance what each party can afford, what would best benefit the children, and the risk that the non-possessing party is willing to take to be pursued for a debt that covers property to which the other party has no legal claim or entitlement.