Divorce and Home Financing
One thing many couples do, as soon as it possible, is buy a home together, usually with the idea of raising a family. This is a major purchase that is commonly financed through a note and home mortgage arrangement. Most home loans are scheduled to be paid off in 30 years and are written in the name of both spouses. This can create problems if the couple decides to divorce before this debt is satisfied, especially if one spouse wants to remain in the marital home once the divorce is finalized. For those with children, a frequent goal is to give them some stability and continuity as the family works through this huge transition. Alternatively, one spouse may want to keep the home as a source of revenue by using it as a rental property. In either case, hard questions must be asked relating to whether it is financially viable to keep the home, and how to arrange financing in the wake of divorce. Individual resources, income earned by the spouse wishing to remain in the home, and market forces will all have an influence on how realistic this outcome is.
Structuring Property Settlements
Neither spouse wants to give up his/her equity in the home without something to show for it. If the home is ultimately sold, the net proceeds of the sale, once the remaining balance on the mortgage is paid, is divided between the spouses according to equitable division rules. In Florida, there is a presumption marital property should be divided equally, which is the approximate allocation most spouses receive in divorce. This presumption can be overcome depending upon the circumstances of the marriage and each spouse’s situation, but this division is the general norm.
If, by contrast, one spouse decides to keep the home, the other spouse must be compensated for the equity he/she is giving up. This is usually done by giving him/her a greater share of other marital assets or reduce/eliminate claims for alimony. A cash buyout is also another option, but this will depend upon the ability of the spouse keeping the home to pay this amount, which could come in the form of a lump sum or periodic payments over time.
Getting the Other Spouse Off the Mortgage
Assuming compensation of the other spouse is agreed upon, the next step is to get him/her off the mortgage. However, lenders are not keen on simply removing a person’s name if there is an outstanding balance. Thus, the only way to remove the other spouse’s name is to refinance the home and have new mortgage documents issued. This means the spouse staying in the home would have to financially qualify for refinancing on his/her income and other financial resources alone, and have the ability to pay the mortgage without the contribution from the former spouse. However, this approach could allow the spouse wishing to keep the home to tap into equity, which could be used to pay off the other spouse’s share of the property. This is a big financial commitment for the spouse keeping the home, and should be thoroughly reviewed before taking this route.
Talk to a Florida Divorce Attorney
Dividing property in a divorce requires making difficult decisions about what does and does not matter to you. The family home is one of those items that is always difficult to address, but working with an experienced divorce attorney can give you the information you need to make a sound decision. The Port St. Lucie divorce attorneys at the office of Baginski Brandt & Brandt understand the short- and long- term implications of divorce and are ready to discuss your options. Contact us today for a confidential consultation.