There are many things to think about when divorcing. What to do with the marital home is one issue that often is not really thought through. This may not be an easy issue to work through, especially in the current real estate market, as there are a number of legal and financial implications. If one party wants to keep the home, does that party currently qualify for a refinance and be able to remove the other party from the note? If the home has negative equity, the lender may be very unlikely to refinance the mortgage and remove any party from the note. Let us look at a hypothetical in which the wife wants to keep the home post-divorce. If she does not earn sufficient income to refinance and remove the husband from the note or if the home’s lack of equity will prohibit refinancing, perhaps he should not quit claim his interest in the home to her. If he is going to remain personally liable for the mortgage amount, he may not want to relinquish his ownership interest. If both parties are on title, both could cause liens to be recorded against the property.
Do divorced parties want to continue owning a home together, perhaps indefinitely, after they are divorced? In our hypothetical, the mortgage amount may prevent the husband from borrowing for a home, car etc. What if the wife fails to make the mortgage, tax, assessment, and/or insurance payments? The lender may seek to collect the full amount from the husband. What if the wife does not maintain the home or make necessary repairs? Should the parties split the cost of the repairs if wife is living in the home but husband is still on title? Some divorcing parties agree to keep the former marital home until the market improves. If that is the plan, it may be best for neither party to live in the home and for it to be leased until it is sold. Some parties agree that the primary residential custodian may continue living in the former marital home so that the children may continue going to a certain school or to provide the children with stability. When the youngest child graduates or at another specific date in the future, the home is to be sold. I have heard many complain that when their former marital home is eventually up for sale, the spouse who remained in possession makes it almost impossible for the listing agent to show the home or leaves it a mess. Perhaps the party in possession wants to continue living in the home longer — especially if it is not costing him or her to live there. A better arrangement may be for the residential custodian to rent a home in the same school district and for the marital home to be sold at the time of the divorce.