Your house could be your most valuable possession. It can also carry years of memories. So, it may be confusing to decide whether you should keep it or sell it.
But selling a house during divorce is not always the right thing to do. It might be worth staying if your kids are living there. However, holding onto the home can strain your financial resources.
Under New Jersey law, couples have multiple options for how to deal with their home. This will depend on a couple’s home equity, mortgage rates, and financial needs.
When you’re choosing a card, it’s beneficial to know all the implications of each side.
Who Gets The House in a Divorce?
When a couple decides to divorce and they are both interested in keeping the home, many ask: who gets the house in a divorce?
New Jersey is an equitable distribution state. This implies that marital assets are fairly separated, but not necessarily split in half.
The NJ Statutes outline several factors that a court takes into account when determining property distribution in a divorce, pursuant to N.J.S.A. 2A:34-23.1.
These include:
- The income and financial requirements of both spouses
- The length of the marriage. Each spouse’s role in the house.
- The present worth of a property.
- The needs of children living in the home
A parent providing care for young children might have to stay in the marital home, for example. This does not, however, ensure the parent’s ownership.
In addition, the names on the deed do not always determine the owner. Courts look at how and when the spouses came into possession of it.
When Selling Makes Sense
Selling a house during divorce is the easiest option for some couples to split their house equity.
After the transaction is final, both partners can begin anew with their portion of the sale proceeds.
Selling might be a good option if neither of the spouses is able to pay for the home. Similarly, it could be useful if both are in need of a clean financial break.
But there are some expenses involved.
These can be costs of real estate and commission, repairs, closing costs, and the mortgage balance.
For example, if your home is sold for $500,000. You have $300k remaining on the mortgage.
This leaves $200,000 before selling costs. Once those costs are covered, you and your spouse can split the money.
However, the division is based on your divorce settlement or court ruling. It doesn’t need to be a 50-50 division.
If A Buyout Seems To Work Better
A divorce house buyout is a scheme where one spouse retains the house, and the other gets his or her share.
This can be useful if you wish to keep your children’s schedule the same. It can also be advisable if your mortgage payment is not too high.
But purchasing out the spouse from the property of a house needs financial planning.
The first thing is to have an accurate home value. Then, the next step is to decide on the amount of equity each spouse is entitled to.
Next, you must have a means to pay for the buyout.
Consider saving for the purchase or refinancing the home, or a home exchange with other marital assets.
For instance, one spouse may be allowed to keep the house while the other might get a bigger portion of the savings.
However, both partners have to take into account the fairness of the deal in totality.
The Mortgage Can Change Everything
It’s not the same as keeping the house and affording it.
If your spouse changes ownership, his name could still be on the mortgage. The debt may still be the responsibility of the lender, then.
Refinancing can help get rid of that obligation. But the spouse who is going to maintain the house has to meet the requirements of the new loan. The Consumer Financial Protection Bureau also explains how mortgage obligations after divorce can affect homeowners who wish to keep their property.
A lender will most likely check income, credit, debts,bts and other financial information.
Also, the interest rate that you currently have can raise your monthly payments.
Other loans may have a provision for an approved loan assumption. But this will depend on the lender and the loan.
If you’re considering a buyout, make sure you know what you’re going to do with the current mortgage.
Look Beyond Monthly Payments
A mortgage payment is only one of the factors.
Property taxes, insurance, utilities, and maintenance also need to be taken into account. Oh, and unforeseen repairs can easily put a dent in your finances.
In the meantime, the amount of income you can expect to receive after the divorce may be less than the amount you received during your marriage.
So, consider what you can afford without depending on your ex-spouse’s income.
Also, take into account the needs you will have in the future.
Even if you don’t want to leave, a smaller home may provide you with more financial freedom.
What If Neither Option Fits?
Sometimes it’s just a matter of timing as to what happens to the house in a divorce.
It might not be the best time to sell. However, neither spouse might be eligible for a buyout.
Temporary joint ownership might be another solution in these cases.
For instance, some couples may agree to maintain the home up until the kids reach their school graduation. But co-ownership after divorce can not be a problem.
All mortgage payments, repairs, taxes, and terms for future sale must be agreed upon by both spouses.
Thus, any agreement needs to be clear as to responsibilities.
It should also cover the actions to take if one spouse ceases to make payments or wants to sell early.
Can A Judge Order A Sale?
Yes. When it is proper, a New Jersey court may sell a marital home.
The court, however, first takes into account the circumstances of the property.
It might look at, for example, each spouse’s financial situation and the financial needs of their children.
A court also may take into account the ability of either spouse to maintain the home.
So, if you decline to sell, it doesn’t necessarily mean that you can stay in the house forever.
Both spouses will have more control over the outcome if they are able to make a clear settlement agreement.
Select The Right Option For Better Decision Making
Buying or selling isn’t the only issue.
Look at the property value and debt first. Then, compare the cost of keeping it to the money that will be available on sale.
Also consider your children’s needs, future earnings, and long-term financial security.
However, the decision should not be made solely on feelings; they are also important.
Ultimately, the answer will be the one that will allow you to live your life without causing financial problems.
Are you looking for Legal Advice For your Divorce or Separation?
The Law Office of Jennifer J. McCaskill, LLC assists clients in comprehending their rights when it comes to divorce and property division.
If you are contemplating a buyout or selling a house during a divorce, our team can help you consider your options.
Call (732) 647-9256 or schedule a free case evaluation with our Monmouth County divorce lawyers.
We want to guide you to make decisions for your home as well as for your future.