Property division is a key requirement of any divorce. Couples who no longer want to share their lives and resources have to split both their assets and their financial obligations. If they are homeowners, then their primary residence is likely one of their most valuable shared assets.
Couples may struggle to sever their emotional attachments to the property during negotiations, which can make it hard to resolve disagreements about the home. Addressing the home during a divorce requires several important steps. The three moves below are all typically mandatory for those addressing a home as part of a divorce.
1. Resolving possession disputes
With rare exceptions for couples who try a birdnesting custody arrangement, usually only one spouse stays in the marital home during and after the divorce. Couples have to reach an agreement regarding temporary possession of the home during the divorce and permanent possession of the house afterward.
Those who don’t reach an agreement may have to go to court and have a judge apply the state’s equitable distribution statute to their home and other property to determine who stays. Factors including custody arrangements and income can influence how a judge resolves possession disputes.
2. Refinancing the mortgage
Once people know who may stay in the home and who intends to leave, refinancing the mortgage is usually a necessary step. Doing so removes the other spouse from the note, meaning that they are no longer responsible for the mortgage.
They can then potentially qualify for a mortgage of their own. The refinancing process typically also involves the execution of a deed. The spouse vacating the property signs a document granting their ownership interest to the other spouse.
3. Offsetting home equity
In some cases, the spouse retaining the home can withdraw equity when they refinance. They can use funds already accrued through mortgage payments to compensate the other spouse.
Other times, they may not be able to afford the mortgage if they withdraw equity. Other property or marital debts can help balance out the equity owed to the spouse who gives up possession.
Preparing for the biggest strategic moves when addressing a marital home as part of the property division process can help people on their way to a divorce. Spouses who know what to expect may be less likely to become frustrated with the process or to agree to an unfavorable outcome when they divorce.