Your house and your divorce
By Felicia Soleil, Divorce Mediator & Family Law Attorney, Family Law Resolutions
You are getting divorced, but your mortgage payment is less than rent. If one of you keeps the house, you will probably owe a significant amount of equity to the person moving out. What do you do?
Sell: You could obviously elect to put yourselves on similar footing with monthly housing payments and sell, which assures you both that the value of the home is true, rather than relying on hypothetical estimates. Selling also frees up some cash to pay down debt, build up savings, or use for a down payment on a separate home.
Allow one party to remain in the home while securing the other party’s equity for payment at a later date: This option awards a specific dollar amount to the other party, reduced to a judgment secured by a lien on the home bearing interest until paid. The judgment will be paid upon a refinance, a sale, or an agreed upon future date, whichever occurs first. This option provides the party in the home the opportunity to get in a better financial position to do a buyout.
Do an immediate buyout: This option provides the party moving out their portion of the equity now but at the added expense to the one remaining in the home of either an increased mortgage payment (presumably at higher interest rates) or an additional monthly payment in the form of a HELOC or other secondary loan.
Remain joint owners of the home: If you both want to retain the home as an investment from which you both will derive a shared benefit, you can choose to retain the home as co-owners using a legal contract to spell out terms such as who can possess and reside in the home or whether it will be treated as a rental property, how costs associated with the home will be shared, and the timing of a future buyout or sale, with provisions for determining the value and division of equity in the future.
Trade away other assets: If you and your spouse have enough other assets in the form of investments, retirement accounts or cash, the person retaining the home may agree to forego their portion of those other assets in exchange for retaining the other person’s portion of the home equity.
Weigh all your choices carefully with the help of a professional to avoid making costly mistakes, and don’t assume an immediate sale is your only path to settlement.
Felicia can be reached at 253.853.6940. All consultations are strictly confidential and currently conducted by appointment via Zoom or phone.