For many Maryland couples, especially those without children, who gets the family home is one of the biggest questions during a divorce. A house can be one of the family’s most valuable assets, and the mortgage on that house one of the largest debts. That means figuring out what happens to the house in a divorce can be complicated and emotional.
The short answer is that you do not have to sell the house in a divorce, but it may sometimes be the best choice. While many judges do order homes sold to wrap up any financial loose ends, there are other options. What works best for you depends on when the home was purchased, by whom, and how it was financed.
The Maryland Marital Property Act requires family court judges to equitably divide a couple’s “marital property.” That includes nearly everything either party acquired during the marriage (with the exception of gifts and inheritances). Generally, your marital home will be part of the marital property to be divided in your divorce. However, a home may be considered one spouse’s “separate property” if:
In other words, the home had not been “comingled” with marital property. Separate property is generally awarded to the party who owns it, so a determination that a home is the separate property of one spouse could be the end of your interest in that property. However, Maryland courts weigh several factors in determining whether the property was comingled, so even if only one spouse’s name is on the title, you should speak to an experienced Maryland divorce attorney to figure out what happens to the house in a divorce.
Assuming your home is marital property, your Maryland family law judge has three options in trail when deciding what happens to the house in a divorce:
Before asking the court to award you the home as part of your share of the marital property, you should have a serious talk with both your attorney and a financial planner or banker to determine if you can afford to keep the house. Remember that because of the way Maryland deals with debt, if you get the house in a divorce, you will most likely be required to refinance the property to remove your spouse’s name from the loan and also be responsible for paying the mortgage. Make sure you are eligible to refinance at a rate you can afford and can realistically expect to pay all the household expenses based on your post-divorce income, child support, and alimony payments.
When one spouse is awarded the house, the other spouse is usually entitled to a share of the equity in the divorce settlement. This is often casually called a divorce house buyout. Legally speaking, if your home is a marital asset, and the mortgage is a marital debt (with both spouses’ names on it), you aren’t so technically selling the property to your spouse. Instead, you are putting the home’s net fair market value on your side of the equity equation. You will then have to balance that out with assets on your spouse’s side of the equation.
Equitable doesn’t automatically mean equal, and a divorce is not a math equation. However, equally dividing the equity in a home is a good place to start in balancing both parties’ interests. Most often, this is done by giving your spouse an interest in the property equal to one half the net equity in the home. This amount is calculated as one half of the fair market value of the home minus the outstanding balance of the mortgage, home equity loan, and any other debt attached to the home.
Often, once the other party’s equitable portion is calculated, the party receiving the home will refinance the property at an amount high enough to pay the other party their equitable portion soon after the divorce is finalized. However, that doesn’t have to be where the money comes from. You can also offset a party’s equity using investment funds, bank accounts, or by taking on more of the joint marital debts. If you will be the one keeping the house, you should talk to your attorney and a banker about your options to create a plan for paying off your spouse’s equitable share.
There can be a lot of emotions wrapped up in a home. However, when deciding what happens to the house in a divorce, your focus should be on the practical aspects, not just how you feel about the property. By proactively considering how you would buy out your spouse’s interest and pay for future household expenses, you can avoid many more hurt feelings after the divorce is final.
At the Law Office of Shelly M. Ingram, our divorce lawyers understand the legal and emotional costs of deciding whether to keep or sell a family home. We can help you weigh your options and can advocate for you once the decision is made and the divorce complaint is filed. If you need help with your divorce, contact us today to schedule a confidential consultation with an attorney.