What Happens to the Marital Home Upon Divorce?
When it comes to divorce, there are a lot of things to think about. In New Jersey, after any child custody and support, one of the important issues is equitable distribution. This means that the courts will fairly, but not necessarily equally, divide property between divorcing spouses.
Marital property generally includes that which is acquired by either spouse, both jointly and separately, during the course of the marriage, with the exception of gifts, inheritances, or premarital assets that have remained separate and have not been comingled with marital assets.
The marital home is frequently the largest and most valuable marital property a couple has. Since divorce involves a couple parting ways, something often needs to be done with the home to achieve equitable distribution.
There are generally three different options for fairly distributing the equity in the family home upon divorce. These include the sale of the house, a buyout of the house, or remaining as co-owners of the house.
Selling the House
One of the easier options for equitable distribution of the marital property is to sell the house and then divide the proceeds. This is often the best option for many couples, as it does not involve putting forth more capital to buy it and eliminates the awkwardness of sharing a space.
When the house is sold, the mortgage, home equity loans, if any, realtors’ commissions and costs of sale are paid off and the net equity can be equally distributed to each spouse, or one spouse may receive more of, or all of, the proceeds if the other spouse is retaining another marital asset of similar value. Under certain exigent financial circumstances, the court will allow the sale of the home while the divorce is pending.
Arranging a Buyout
Another option is for one spouse to buy out the interest of the other via a refinance. For example, if a home has a fair market value of $300,000 and there is a mortgage on the property for $200,000, this means that there is net equity of $100,000 left to be split between the parties. If an equal split is being done, the party buying out the other will owe him or her $50,000 but he or she will first have to pay off the mortgage to release the other from liability. In this example, the party buying out the interest of the other would refinance the home for $250,000; enough to pay off the $200,000 mortgage and pay the other spouse $50,000.
It is important to consider the refinancing costs such as attorney’s fees, recording fees, a new survey, and title costs. These costs are generally borne by the party doing the buyout.
Co-Owning the House
Often the parties will agree that the house will be sold at some future defined date, such as when the youngest graduates from high school or leaves for college. Sometimes the spouse who leaves the home will have their equity in the home pre-determined at the amount of their equity at the time they leave the home. At the time of sale, the spouse is paid the pre-determined amount of his or her equity. Other times, the parties will wait to determine the equity until the actual time of sale with a credit being given to the spouse for any pay-down of the principal balance on the mortgage.
The difficulty with this option is that a lot of individuals cannot afford to pay the mortgage on the marital property and pay for another place to live at the same time.
Somerville Divorce Lawyer Katherine K. Wagner Helps Those Who Are Dealing With Divorce and Equitable Distribution
If you or a loved one is going through a divorce it can impact you physically, mentally, emotionally, and financially. It is important that you find a knowledgeable and experienced family law attorney who understands all aspects of divorce. Somerville divorce lawyer, Katherine K. Wagner helps fight to get you what you deserve. To schedule a consultation, contact us online or call 908-526-0099 today. From our Somerville, New Jersey office we represent clients in Hillsborough Township, Bridgewater Township and Branchburg Township, Somerset County, Hunterdon County and Middlesex County.