Determining what happens to your property during a divorce can be difficult. When discussing this issue, it is sometimes helpful to look at one state as an example. In New Jersey, marital property is divided “equitably“, which means fairly, not necessarily equally. This usually includes anything acquired by either spouse throughout the course of the marriage, except for gifts or inheritance. For this reason, dividing a family home amongst a divorcing couple can be challenging. Even the most amicable situations can be very emotional.
You have three options in New Jersey when considering fair distribution of the home:
- Sell the house and divide the sales proceeds. This can be a viable option if the spouses have fallen on financial hardship and neither can afford to buy out the other or keep up with the mortgage payments after a divorce. Prior to this, a price valuation needs to be completed to determine how much the home has appreciated since its purchase. This option can potentially provide peace of mind and a fresh financial start.
- One spouse may also buy out the other spouse’s equity. The buying spouse will arrange to refinance the mortgage loan and be required to pass the lender’s eligibility requirements. This works well if one spouse wants his/her name removed from the loan, while the other wants the house. The fees associated with refinancing the mortgage can be substantial, though, and couples have to decide who is going to assume this cost. In a situation where money might be tight, this option becomes more difficult.
- Decide to keep the home (typically agreeing to sell it after a certain period of time). Normally, one spouse agrees to vacate the house and the couple decides on a timeline to sell the house outside of the divorce settlement, dividing their shares fairly. Although this is common, most attorneys advise against this unless the couple has children who are in their final years of high school and moving would interfere with their education. This requires a certain level of cooperation between the divorcing couple, though. As you can imagine, divorced couples have difficulty keeping up with house payments as well as keeping the home operational.
Although there seems to be a slew of problems that arise with divorce, the process of dividing the marital home can be made easier. Understanding your options with the help of an attorney can certainly make a difference. And ultimately, if a separating couple does option to sell their home, working with a real estate professional with expertise in this area can make this process a little less overwhelming.
