“Can I keep the house?” The answer varies from case to case. This seemingly simple question is actually a multifaceted one fraught with complicated facts- and emotions. Years ago a man literally divided the house in half by using a chainsaw to cut through the roof and the walls. That triumph of emotion over
intellect is not the preferred way of answering the question.
Generally, there are two main areas with many sub-parts to explore. First, does the income and asset picture allow you to buy your spouse’s interest? Second, assuming you can buy out your spouse, can you afford to keep the house?
In most cases the marital home is subject to equitable distribution, and both spouses have an interest in the equity. (Fair market value – mortgage indebtedness=equity). When there is very little equity, a buyout is easier. In other cases, there is a great deal of equity and one solution is to use other marital assets as an offset, i.e., shares of the other assets are traded for the spouse’s interest in the home equity. Sometimes the spouse will agree to a buyout over time (e.g., monthly payments). Another factor is often whether financing, either private or through a lending institution, will be available.
Assuming you can trade, finance or otherwise purchase your spouse’s interest, can you afford to keep the home? Do you have enough income to make monthly payments? Wages, investment income, alimony and child support all count, but even if you can afford to make monthly payments, all the other expenses that come with homeownership, such as taxes, utilities, insurance, repairs, maintenance, etc. must also be considered. And, even if you can, will that leave you “house poor”, pouring so much of your monthly income into your house that you have little or no money left to do anything else? This comes down to a personal lifestyle preference. For some, the house is the highest priority. For others, a less constricted lifestyle is more important.
Even in cases where there are enough assets to trade for the equity in the house, you will undoubtedly be given a reasonable period to refinance the mortgage in order to release your spouse from the obligation. Therefore, the amount of equity and your income will still come into play in deciding whether you will qualify to refinance the mortgage. Many times, the circumstances lead the couple to agree the house should be sold and the equity divided.
There are other future factors to consider too. If you buy your spouse’s interest and the market improves, you won’t have to share the upside. If, on the other hand, the market tanks or major repairs are necessary, – it’s all yours. By selling to a third party, you will share the profit or the loss and any needed expenses.
Can I keep the house? It is a question that you and your lawyer should discuss at length, keeping in mind your priorities and the lifestyle that fits best with your future plans.