How to Keep Your House During a Divorce?

Divorce brings a whirlwind of emotions, but for many, their priority is figuring out how they can keep their house. A house shared during marriage is both a financial asset and a space that has become a home. Maintaining ownership can represent stability and continuity.

Laws vary significantly across states, with distinctions between community property and equitable distribution states dictating the division of assets. This article outlines the general legal frameworks involved, offering insights into how the marital home is treated during divorce proceedings and what factors influence its ownership post-separation. Get practical tips on how to navigate the legal, financial, and emotional landscapes of divorce.

Who Keeps the House During Divorce?

Every divorce is different because it involves the personal and financial circumstances of the separating couple. In the US, the federal government does not oversee divorce proceedings; instead, it leaves the issue to the state governments. The legal framework governing property ownership in a divorce is influenced by whether the state follows the community property system or equitable distribution. These principles affect how property is categorized and divided during a divorce.

Community Property Jurisdiction

Community property states, which include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, operate under community property law. In these states, all property and income acquired during the marriage are considered jointly owned by both spouses, regardless of whose name is on the title. Each spouse is entitled to a 50% share of the community property upon divorce.

The principles of community property are:

• Both spouses are considered equal owners of all property acquired during the marriage, regardless of whose name is on the title or who earned the income.
• Only assets and income earned during the marriage are considered community property. Property owned by one spouse before the marriage, as well as gifts and inheritances received by one spouse during the marriage, are typically treated as separate property and not subject to division upon divorce.
• Community property is divided equally between the spouses. This means each spouse receives a 50% share of the total value of all community assets and debts, not necessarily a 50/50 division of each individual item.

Couples in community property states can alter the default community property rules through prenuptial or postnuptial agreements, where they can define how they want their assets to be treated in the event of a divorce.

Common Law and Equal Distribution States

In common law or equitable distribution states, the law governs the division of property in a divorce based on fairness and equity rather than an automatic 50/50 split. This method is used in the majority of states.

Equitable distribution means that property and debts are divided in a way that is fair to both parties, which does not necessarily result in an equal split. The court considers various factors to determine what is equitable or fair, such as:

• The length of the marriage
• The age, health, and income of each spouse
• The standard of living established during the marriage
• Each spouse’s earning capacity and potential future earnings
• Contributions to marital property, including non-monetary contributions like homemaking and child-rearing
• Each spouse’s financial needs
• Any wasteful dissipation of assets by either spouse

Like assets, debts such as mortgages, personal loans, or car loans are also divided equitably. The court will determine which debts are marital and decide how to allocate them fairly between spouses.

Many divorces in equitable distribution states are resolved through negotiation and settlement between the spouses, often with the assistance of attorneys or mediators. They may agree on a division of property that deviates from what a court might decide but still falls within the bounds of being considered fair and equitable.

If the couple does not come to an amicable settlement, the court will identify all marital property, assess its value, and then distribute it between the spouses in a way that it considers fair, based on the above factors.

Separate Property

Separate property acquired before marriage is generally handled with the principle that it remains the sole property of the individual who owned it prior to the marriage, even in the event of a divorce.

Separate property is usually protected from being divided during a divorce, meaning it should return to the spouse who originally owned it without the other spouse having a claim to it. This separate property principle applies to community property and equitable distribution states.

That means that if you own a house before you are married and the asset is never comingled and clearly identified as separate, then it is usually not subject to division during a divorce process. To maintain its separate status, the property should not be commingled with marital assets.

For example, if one spouse owns a house before marriage and then both spouses pay the mortgage after marriage, it can be converted into marital property. To prove an asset is a separate property, you must provide receipts, deeds, or bank statements with the acquisition date.

However, the increase in value of separate property during the marriage can sometimes be considered marital property, especially if the increase can be attributed to the efforts or contributions of both spouses during the marriage. For example, if both couples contribute funds to a home renovation.

Can You Force Sale of a House During Divorce?

The divorce process is hard, no matter how amicable the separation is. Sometimes, holding onto a house after divorce isn’t possible. If one spouse wants to keep the house despite being unable to afford it, can you force the sale of the house?

It is possible to force the sale of a house during a divorce under certain circumstances. This often occurs when one spouse wants to sell the property and the other does not. The party that doesn’t want to sell has the option to buy out the other, but a forced sale might be necessary if they can’t afford the buyout.

If spouses cannot agree on what to do with the marital home, one spouse can ask the court for an order to sell the property through a divorce decree. This request is often part of the divorce proceedings.

In many divorces, the marital home is more than what either individual can afford on their own. Therefore, it makes financial sense to sell the property. If the court is in charge of dividing marital assets and neither spouse can afford to maintain the costs of the home, they will likely order the sale of the asset.

After the sale of the house, the proceeds are used to pay off any outstanding mortgage, liens, and selling costs. The remaining money is then divided between the spouses, which can be equally in community property states or in an equitable manner in equitable distribution states, depending on the divorce circumstances and each spouse’s financial contributions.

How to Keep the House in a Divorce

If you are going through a divorce and want to keep your house, you might find yourself in a difficult situation. Whether or not you get to keep the house in a divorce depends on your financial circumstances and what your former spouse wants. Typically, only one spouse gets to maintain ownership of a marital home post-divorce.

Here’s the process you need to follow to keep your house in a divorce.

Evaluate Financial Viability: Can You Afford the Mortgage Payments?

Divorce isn’t all about legalities. Consider a divorce similar to a division or a company; it requires financial analysis. Before deciding to keep the house during a divorce, conducting a thorough financial assessment is crucial. Can you afford the home without your former spouse’s contribution?

This process involves examining your current financial situation and projecting future financial capabilities. The goal is to determine whether you can afford to maintain the property independently, considering the costs associated with homeownership and your overall financial stability after the divorce.

One of the primary considerations is whether you can afford the mortgage payments on your own. This involves a detailed review of your income, expenses, and other financial obligations. You’ll need to consider your current earnings and your potential for future income, including career prospects and stability. Factor in all costs of homeownership, including:

• Mortgage payments
• Property taxes
• Homeowners Insurance
• Maintenance
• Repairs

Keeping the house will significantly affect the division of other marital assets and debts. You must consider the house not just as a physical asset but also in the context of your entire financial settlement. For example, if you keep the home, you might receive a smaller portion of other assets, such as savings accounts, investments, or retirement funds, to offset the property’s value.

If you decide to keep the house, you may need to refinance the mortgage to remove your spouse’s name from the loan, making you the sole owner of the property. Refinancing can also offer an opportunity to adjust the mortgage terms to better suit your new financial situation.

To assess whether or not you can afford a mortgage on your own or whether you can afford to refinance your home, you should work with a mortgage broker. A mortgage broker can help assess your income and the financial viability of owning the home independently.

Connect with top local mortgage brokers with FastExpert.

Negotiations with Your Spouse

Do both you and your spouse want to keep the house? Or is your spouse willing to let you buy them out? The answer will significantly influence how easy your negotiations will be. Ideally, you are both motivated to create a fair and amicable solution.

Start with clear and open dialogue. Effective communication helps both parties understand each other’s perspectives and priorities, leading to mutually agreeable solutions. Clearly define your objectives for the negotiation, especially regarding the house. Understand what you want to achieve and be prepared to make concessions. It’s important to approach these conversations with honesty, respect, and a willingness to listen, which can significantly reduce conflicts and facilitate the negotiation process.

One common method to keep the house is to buy out your spouse’s share of the home equity. This arrangement requires an appraisal to determine the home’s value and calculate the amount owed to the spouse for their share. Some couples engage a real estate agent (or several) to get a comparative market analysis, which can often give a more updated home value.

Another option is to exchange other marital assets for the house. For example, you might agree to give up your share of retirement accounts, investments, or other property in return for full ownership of the house. Alternatively, if you are owed spousal support or child support, you might choose to partially or entirely forgo that income in exchange for the home.

Even in the most amicable of divorces, both parties should engage a divorce attorney. The divorce settlement negotiation requires thoroughly evaluating the assets’ values to ensure a fair exchange.

Consider Co-Ownership

Maintaining the co-ownership of a marital home is often an overlooked option. Still, it can be a great way to keep your home after a divorce without significant financial strains. There are many reasons divorced couples choose to co-own:

1. The property is underwater, and you must wait for the market to rebound before selling.
2. They want to keep their kids in the same school district.
3. They want to avoid disrupting their children’s lives, so they keep the house for the primary caregiver to live in with the children.
4. Both want to continue their investment in real estate but can’t afford it on their own.

If you co-own a home with your ex-spouse, you need to form an official document outlining how all costs will be handled. This agreement should be structured similarly to an operating agreement in an LLC. Clearly outline who will pay the mortgage, maintenance costs, property taxes, and insurance.

Furthermore, there should be an agreement about how many future property improvements are handled and how the asset will be divided upon eventual sale. Both parties should work with a divorce attorney to draw up a binding agreement.

Preparing for Life After the Divorce Process

Your life after divorce will significantly depend on your circumstances, including your earning potential and the settlement arranged with your ex-spouse.

Homeownership is expensive. In some areas, it costs more than renting. Furthermore, your household income has likely declined, meaning you are likely on a tighter budget. Here are some of the homeownership expenses you need to be prepared for and tips on how to budget for long-term financial success.

Budgeting for Property Taxes

If you refinance or remove your spouse from the title of a home, the property may have its property taxes reassessed, resulting in a significant increase. Furthermore, real estate taxes can increase annually, depending on the property’s value, local tax rate shifts, or property enhancements. 

Check with your local jurisdiction to see how periodically they reassess property values and if any limits are put on these reassessments.

Budgeting for Maintenance

If you’ve lived in your home for some time, you are no stranger to maintenance. Regular maintenance helps prevent minor issues from escalating into major repairs. It includes routine tasks such as cleaning gutters, servicing heating and cooling systems, and checking for leaks or damages.

For some, these were tasks once carried out by their former spouse, and they will now fall into your hands as sole owner.

A general rule of thumb is to allocate 1% to 4% of your home’s value per year for maintenance and repairs. The exact percentage depends on the home’s age, condition, and size, as well as how skilled you are at DIY projects. Older homes may require more maintenance, thus leaning towards the higher end of this range.

Budgeting for Repairs

Every home eventually needs repairs, whether a new roof, HVAC system, or water heater. These repairs often come with substantial costs and can be unpredictable in timing.

To anticipate future significant repairs, conduct a thorough assessment of your home’s condition. Identify the age and state of critical components like the roof, plumbing, electrical systems, and appliances. Knowing the lifespan of these elements can help you predict when they might need to be replaced or repaired.

Based on the assessment of your home, create a long-term savings plan for anticipated repairs and replacements. Determine a monthly amount to set aside for these major expenses. This contribution should be in addition to your regular maintenance budget.

When multiple major repairs are on the horizon, prioritize them based on urgency and impact. Safety-related repairs, or those that could lead to more significant damage if delayed, should be at the top of the list. Cosmetic repairs should always be your lowest priority.

Long-Term Financial Planning

Post-divorce life brings a new set of financial realities and opportunities. You are no longer planning your financial future with a partner but on your own. Before setting long-term financial goals, ensure you thoroughly understand your current assets, liabilities, income, and expenses.

A financial advisor can comprehensively analyze your financial situation and help you understand the implications of your divorce settlement.

With a clear understanding of your financial position, it’s time to set goals. Effective goal setting involves following the SMART method, meaning that your goals are specific, measurable, achievable, relevant, and time-bound. Your goals could include funding a retirement plan, home renovations, child education, and investing for personal growth.

What Do You Do When Keeping the House After Divorce is Not an Option?

When retaining the home after a divorce is not feasible or desirable, several alternatives can provide practical solutions for both parties.

Selling and Dividing the Proceeds

Often, the simplest solution during a divorce is to sell the marital home and divide the proceeds. It leads to a clean break for both parties. This option allows each person to receive a share of the property value, which can be used to start fresh, whether by purchasing a new home, investing, or using the funds for other financial goals.

When selling your home during a divorce, you must work with a real estate agent who can help navigate the complex relationship between you and your former spouse. They can help bridge the gap between conflicting opinions about how to sell the property.

Find an experienced realtor with FastExpert. Compare reviews and track records and an agent you both feel confident trusting.

Deferred Sale of Home Arrangement

A deferred sale of the home is similar to co-ownership. It’s often a path couples choose when children are involved. In these agreements, the home sale is postponed for a specified period, usually until a certain event occurs, like when the youngest child turns 18. This arrangement can provide stability for children and allow time for both spouses to prepare for a transition.

When deferring the sale of a home, make sure that a legal agreement is formed that includes maintenance responsibilities, financial obligations, and sale deadlines.

Do You Keep the House?

The decision to keep your house in a divorce depends on both parties’ financial viability, legal entitlements, and personal desires. You must decide if it makes financial sense, negotiate with your spouse, and understand the long-term implications.

Carefully plan to asses if you can afford and are willing to pay for the costs associated with the home’s upkeep. This is not a decision you should make on your own. Consult with a divorce attorney, financial advisor, mortgage broker, and real estate agent to make sure you fully understand your options and the implications of your decision.

If keeping your home is a priority in your divorce, or if you’re exploring the best options for your real estate assets, FastExpert can connect you with expert real estate agents who specialize in handling such sensitive situations. Find professionals who can provide the guidance and support you need to make informed decisions about your property during this pivotal time.