For some people who are going through a divorce, the status of the house is the biggest financial decision they have to make. There are a few ways to handle this, so carefully evaluate each option before you decide on what you’d like to do.
If you are going through mediation or another collaborative divorce method, remember that your choice might not align with your ex’s. In this case, you’d have to negotiate to come up with terms that are mutually agreeable.
Some parents use the bird’s nest style of parenting after the divorce. This is when they retain joint ownership of the house. The kids live at the home full-time and the parents are the ones who come and go according to the parenting time schedule. While this does enable the children to enjoy the stability of a single home, it makes things much harder for the adults who have to figure out the logistics of this arrangement.
One party buys out the other
If one party is going to keep the marital home, they can possibly buy the other one out. This is done through an exchange of cash or by funneling assets that are equitable to the other party. Before you do this, you need to know the buyout amount. When both parties agree on the buyout amount, there isn’t any need to hire an outside appraiser. If you can’t determine it, you will need to hire one.
Remember, the buyout amount is going to be around half of the shared equity in the home. This is because one person is simply buying out the other person’s share of the home. You can’t include the mortgage balance in the amount the person will hand over because the person who keeps the home will still be responsible for paying the mortgage company.
For most parties, using the buyout option means that the person who keeps the home will be responsible for obtaining a mortgage on it. Before you say you want to exercise this choice, you will need to make sure that you can get the mortgage or that you have the financial backing to obtain the home outright.
Selling the home
Some divorces end with the home being sold. Out of the proceeds, you have to pay off the mortgage and then split the profit with each other according to the terms of the property division agreement. This is sometimes an option that isn’t possible because the home was passed down through inheritance or some other situation, so be sure that you find out what’s possible with your home.
The outcome of the marital home is only one decision that you have to make in a divorce. You also need to work through other marital property and decide on child custody before the divorce is finalized.