Understanding the Impact Divorce Has on Mortgage

Divorces are complicated, there’s no way around it. In the U.S., 40% to 50% of marriages end in divorce, but that doesn’t mean the process has been streamlined. And at a time when you’re making some of the most difficult decisions of your life, you also have to decide how to split up your stuff—including the biggest asset most couples share, their home.

Maybe you and your soon-to-be-ex-spouse are already in agreement on what you're doing with the family home. But maybe you're not—and it's a loaded decision. Houses come with emotions, upkeep and expenses, but moving is also a hassle. Here's how it works.

Who Gets the House?

This question doesn’t have a simple answer. It depends on the state where you live, whether the house is joint property, and whether you have children, among other things.

Regarding your state of residence, states follow either community property or equitable division approach:

Community Property

In a marriage, everything is either jointly owned (“community” property) or owned by one spouse. Here, everything that was jointly owned is divided down the middle, regardless of whether one spouse should get more than the other. There are some exceptions for separate property, such as property owned by one spouse before the marriage, money from a personal injury settlement or an inheritance to one spouse.

Equitable Division

With this approach, the property is divided “fairly” between the spouses, based on factors such as each spouse’s financial condition, what each spouse makes, how long they’ve been married and who has physical custody of the children. There are also exceptions for separate property here.

Should You Try to Keep the House?

Before deciding to fight for your family home, take a good look at your money situation and be sure that it makes financial sense. Will you earn enough money to cover the rent, mortgage and utilities? It may be smart to spend a little time with a financial planner who can talk you through your options.

If you’ve done the math and keeping the home is a financially sound option, you might argue that you should keep the home (and not your spouse) for the following reasons:

• You owned the home first. If you bought the home before you got married, you’ve got a pretty strong case for keeping it yourself.
• You love the home. If you’ve lived in the house for a long time and put long hours of work into renovating it and making it yours, you can certainly argue that you’re deeply attached to it and would be heartbroken to lose it.
• The kids need the home. If your children are young, the prospect of putting them through a divorce and a move can be daunting—and may be very disruptive. Courts often try to go with the scenario that’s easiest for the kids.
• You can afford the home. If you make enough to stay in the house with your children, without relying too heavily on alimony or child support, that’s a valid argument.

It may be that in order to keep the house, you must buy your spouse out of their share of the home’s equity and become the home’s sole owner. You may need to refinance. Or, if the two of you can swing it, you might decide to split home expenses between you and keep one parent in the home with the children. In the latter case, there may be an agreement about how future home sale proceeds would be divided between you.

Why Shouldn’t You Keep the Home?

Staying in the house may seem like a big win, but there are good reasons for putting out the "for sale" sign:

• You can’t afford it. This is a big one. Being a homeowner on a single income can be a challenge, and it might be a terrible financial choice to take on the whole mortgage (and all homeowners insurance, property taxes and maintenance costs) by yourself.
• You need to move on. Staying in the house is going to remind you of your marriage, your ex-spouse, and your life together in it. That may not be something you want.

What Else Can Be Done With the Home?

Other scenarios with the home depend on what you owe on the mortgage, what the house is worth and how much money you earn. Some options:

Sell the House

If neither spouse can stay in the home or neither spouse wants to, the home can be sold with the proceeds split 50/50 or equitably between spouses. If you owe more on the mortgage than the home is worth, the home would be sold and any remaining debt would be split between you.

Co-Own the Home

In the event that one of you isn’t staying in the house, you don’t (necessarily) have to sell it. You could rent it out and split the profits as co-landlords.

What If You Can’t Agree On Who Gets the Home?

In general, if you’re the spouse who spends the most time with the children, courts will lean toward giving you the house, assuming you can afford to stay there.

If you don’t have kids, however, things can get sticky. If only one spouse owns the home, they can ask the other spouse to leave. Otherwise, a court must decide who gets the house, and no one has any legal right to kick anyone out in the meantime.

In the end, a good attorney can advise you of your rights, the best approach, and how the courts in your area tend to decide. Recommendations from acquaintances who’ve gone through a divorce are a good place to start, or you can try Nolo.com’s lawyer directory, which lets you search for attorneys by state and practice area.