Thinking about leaving your family home can be one of the most difficult parts of a divorce. And in many divorces, the family home is the largest asset. So it plays a significant role in the financial negotiations.
Understanding how the process works and what to consider can help you make a plan. Do you want to stay in the home? Are you ready to sell it and move on? Do you need some other option?
Who gets the house in a divorce isn’t always straightforward, so let’s dig into the details.
How assets are divided
The first thing you need to know is how assets are divided in your state.
In a Georgia divorce, the law says that assets are divided based on equitable distribution. What does that mean? A judge can divide assets in the way they deem fair, not necessarily equally.
Of course, the way a law is carried out in practice isn’t always exactly how it sounds. And a Georgia divorce is a perfect example of that.
While judges can consider a number of factors (like how long the couple has been married or their individual incomes) in practice, judges generally divide the whole marital pie close to 50/50. Sometimes that can be a really hard pill to swallow. Maybe your spouse didn’t work. Maybe they were bad at handling finances and racked up a lot of consumer debt. Maybe you were good at saving for retirement and built up a good investment portfolio and your spouse did none of that. You can’t be faulted for thinking those types of factors should be considered. But the truth is, judges almost never deviate from a general 50/50 split.
But that doesn’t mean each asset or debt is split half and half. One person may end up with more retirement assets, while the other person ends up with more equity in the home.
But what if the home is only titled in one person’s name? Or was bought before the marriage? In Georgia, any asset you acquire during the marriage (except by gift or inheritance) is considered marital property. This is true regardless of whose name is on the title. If the home was bought before the marriage, then it’s likely that part of the home is considered marital property. Equity one spouse built before the marriage does not automatically become marital. But equity the spouses built after the marriage is marital.
The judge can order that one spouse refinance the house and buy the other spouse out. They can also order that the house be sold — even if the parties want to keep it.
Parties that work out a solution on their own without involving the court may achieve a result that’s more acceptable to both of them. In a low-conflict or uncontested divorce, the spouses can negotiate a plan that works for them, getting creative if they need to. A judge’s decision will be more by-the-book.
Determining whether you want the house
Your knee-jerk reaction may be, “Obviously I want the house.”
That makes sense. It’s where you live, where all your belongings are. You’ve probably made some wonderful memories there.
But before you plant your stake in the ground, take time to think about whether keeping the house is the right choice for you.
First and foremost, do you really want to stay in the house? With emotions running high, we sometimes lay claim to things because they’re family. Or…ahem…because we don’t want someone else to have them.
Be honest with yourself. Have you always complained about the neighborhood? Do you constantly grumble about the amount of upkeep? Is your commute atrocious?
This could be an opportunity to walk away from the house and start a new chapter.
Of course, you may really love it, and that’s okay too. You may have other reasons for wanting to stay. Maybe you want primary physical custody of your children, and you’d like to maintain that consistency for them.
Next, can you afford to stay in the house? The truth is, many divorcing couples can’t afford the mortgage payments on their family home after the divorce.
A quick way to assess whether you can handle that financial obligation is the 30% test. Multiply your monthly income by .30. Is that number lower or higher than your monthly mortgage payment? If it’s lower, then you’ll probably have a difficult time making those payments. If it’s higher, there’s a good chance you can afford it.
Won’t alimony or child support help? They may, or they may not. Alimony and child support payments often cover less than what divorcing couples anticipate.
How to divide the house
You have a few options for dividing the equity in the home between you and your spouse.
Negotiate a buyout
If you’re sure you want to stay in the house, then you need to negotiate a buyout with your spouse. In a buyout, one spouse pays the other in cash for their interest in the house.
A buyout generally occurs as part of a refinance. The spouse staying in the home refinances the home, applying for a new mortgage loan in just their name. That new mortgage loan covers the outstanding balance on the old loan plus whatever they need to pay the other spouse to buy them out.
For instance, say the family home appraises for $250,000. There is a balance of $150,000 on their mortgage, so they have $100,000 in equity to split between them. Spouse A is staying in the house, so Spouse A takes out a new mortgage loan for $200,000. That covers the $150,000 remaining mortgage balance and $50,000 Spouse A will pay Spouse B for their share of the equity.
(Note: this example assumes that the equity is split 50/50.)
Sell the house
If neither of you wants or can afford to stay in the house (or if you can’t agree on who stays), you can choose to sell the house instead. Then you can divide the proceeds of the sale — after you pay off the mortgage and pay the realtor.
For some couples, selling the house is a great way to walk away from the divorce with cash in hand.
But it’s good to keep in mind that selling a house is stressful at the best of times. Doing it while navigating a divorce will be challenging. This isn’t the time to try to sell it yourself without a realtor.
Try to agree on a realtor as quickly as possible, and then trust their expertise about the listing price. If one spouse is going to remain living in the house and be responsible for repairs or other updates, they may deserve to be compensated for those expenses.
If you go this route, be forewarned that selling and closing on the house could take longer than the divorce.
Co-own the house
A less common solution is to continue co-owning the house together. Co-ownership after divorce can be a complex and messy situation. But for some divorcing couples, it’s the right choice.
Co-owning the home is usually a temporary option. For instance, the divorcing couple may choose to co-own until one has saved enough money to buy the other out. Or they may choose to co-own until their child leaves for college.
If you’re considering co-ownership, it’s critically important to get all the details down in the settlement agreement. You’re tying your credit rating and your finances to your ex-spouse’s, so this isn’t something you want to do willy-nilly.
Making your own decisions about the house
Now that you understand how assets are divided and what the options are, remember that you and your spouse have the option to make your own decision about your family home.
When you settle your divorce outside a courtroom — either through mediation or by negotiating an uncontested divorce — you’re in charge, not the judge. The judge will have to approve your settlement agreement, but they usually do.
When you work with a divorce attorney that specializes in uncontested divorce, you have more control. You get to think outside the box and come up with solutions that work for you.
Everyday, we help couples navigate the decision about who gets the house in a divorce. Contact us for a legal clarity session to see what’s right for you.