Should I Keep My House in the Divorce?

In the past, it was an achievement to get the house as part of a divorce settlement, however, that was back when the housing market was robust.

Instead of staying cozy and financially secure in one's house and keeping the kids in their childhood home until they go off to college, many spouses are getting strapped with a house that is sinking in value.

A lot of divorcing individuals cannot afford to maintain a home that took two incomes to cover the mortgage, and in a weak market they may not be able to sell.

Before the Great Recession a house often represented the majority of equity in a marriage, but these days many homes have gone from a significant asset to a "hot potato," and neither spouse wants to end up with the house.

If a couple lived at the top of their means during the marriage, the spouses often can't divide that lifestyle and both afford such a house after the divorce. These days and depending on the market, an ex-spouse is often better off getting as much cash as possible in the divorce settlement and unloading the house quickly.

Every Divorce is Unique

We are often asked, "Should I keep the house?" As with all divorce matters, the answer is "it depends." There are a lot of factors that come into play when you are thinking about keeping the house.

Here are some questions to ask:

  • How big is the house?
  • How much is owed on the house?
  • Can you afford to pay the monthly payments?
  • Can you afford major repairs?
  • Can you refinance it and put it in your own name?
  • Is there equity in the house?
  • Will a bank loan you the money?
  • Are there enough marital assets to buy your spouse out of the house?
  • If there's not enough cash, can you trade another asset?

In 2005 and 2006, there were plenty of people who retained the marital home with equity in exchange for a retirement or brokerage account, thinking that it was a fair trade, only to learn that when the real estate bubble burst, they were upside down on their house, and without a 401(k) or a brokerage account.

If your house is upside down, the decision to keep the house could come down to which spouse can afford to pay the mortgage. If neither of you can afford to sell the house for less than what is owed on the loan, at least one of you can still live in it, providing that person can afford the monthly payments – and ride it out until the house gains equity.

It's important to consider all factors, including the economy and its impact on the real estate market, your ability to get a loan in your name, and whether you can afford to keep the house.

Are you looking for a San Fernando divorce lawyer? Call Cutter & Lax to speak with an attorney who is a board certified family law specialist!