In some cases, figuring out what to do with the marital home can be a major source of contention and ultimately delay final resolution of the divorce. Either both parties want to keep it and they can’t agree on who should stay and who should go, or one party may want to stay but may not be able to afford it on their own, so the other party wants to sell it. If the parties are parents, minimizing negative effects on the children also need to be considered such as potentially having to change school districts in the middle of the year. With a rollercoaster real estate market and skyrocketing interest rates, it can also be more difficult to refinance and find affordable alternative housing.
To provide you with some framework, here is our attempt to clarify what happens to the marital home in many cases that we see in Massachusetts:
- If one party is interested in remaining in the home, the parties can either agree upon a fair market value for the home, have a joint appraisal conducted, or have individual appraisals conducted. Try to get a joint appraisal, if possible, as it avoids a “battle of the experts” where you end up with 2 different appraisals with wildly different values.
- Once the property is valued, you deduct any mortgages/HELOCs/liens on the house to determine how much equity there is. If the parties intend to a have a 50/50 split of marital assets, then the person who wants to remain in the home would divide this number in half to determine the approximate amount to buy-out their spouse’s interest in the home. For example, if a house is valued at $500,000 and has a mortgage for $320,000, there would be $180,000 in equity and a party would pay approximately $90,000 to buy-out their spouse.
- Since many people don’t have access to such a substantial amount of liquid funds, the party remaining in the home would need to qualify to refinance the existing mortgage amount plus the buy-out amount. In the example above, this would be $320,000 plus $90,000 for a refinance of $410,000. Once the house is refinanced, the $90k gets paid to the spouse moving out and the mortgage balance remains the same.
- If the parties cannot agree on a value for the house, the judge can force a sale of the property. This is an important consideration for the spouse who is looking to remain in the home.
- If the spouse remaining in the house cannot qualify for a refinance and the party moving out has a financial support obligation owed to the remaining spouse (either child support, alimony, or a combined amount), the party moving out could agree to continue paying the marital home expenses in lieu of the support amount (in part or in whole) and delay sale until their children reach a certain age (or any other customized timeline that the parties agree to).
- We’ve also seen interesting situations in which the home is in Spouse A’s name, but Spouse B wants to remain in the house. Post-divorce, Spouse A maintains ownership of the house and pays a buy-out amount to Spouse B, but Spouse B remains living in the home and the parties execute a Lease Agreement for Spouse B to rent from Spouse A.
Of course, the marital home is only one piece of the marital estate that needs to be addressed in a divorce, and negotiations relative to other assets and liabilities can affect what ends up happening to the house.
If you are facing the prospect of a divorce and have questions related to the marital home, we invite you to schedule a consultation with us so we can give tailored advice to your specific circumstances.