How Should We Handle the House in A Divorce?

An experienced divorce lawyer can assess your situation and advice you on how to safeguard your interest where the family home is concerned.

Read on to learn more about how to deal with the family home in a divorce.

Sell

Selling the house can give you a clean start both emotionally and financially. Consider this option if you do not want to keep the house or if neither of you can afford mortgage payments and general upkeep on your own.

Before selling the house, you must complete the entire mortgage and ensure that the house does not have any debts attached. Also, consider the issue of capital gains tax. Put simply, capital gains tax is the tax you will need to pay on the profit you receive from selling the house.

If you sell the house together, you can exclude the first $500,000 from taxation if you have owned the home for a minimum of two years and each of you has lived here for two of the last five years.

In the event that you sell the house after the divorce, each of you can exclude $250,000 from taxation if you meet the requirements.

Michigan is a common property state. This means that the non-owning spouse may still be entitled to a portion of the profits if they contributed to the value of the home.

Buyout

Consider buying the house from your spouse if you want to keep the house for any number of reasons. Keeping the house can be especially favorable if you do not want to move the children to a new home.

As the buyer, you need to be financially prepared to incur the cost of refinancing the home. In exchange for agreeing to sell the home, your spouse may ask that you give up certain things such as marital assets and spousal support as part of the divorce settlement.

You may be responsible for the typical costs involved in selling a house including brokers' fees. You will also bear the financial burden if the value of the house depreciates.

If you are the seller, you will lose your interest in the property and any appreciation in the value of the house.

If the house does not have a mortgage on it and you are unsure of the home's value, hire a real estate appraiser to value the property so you can determine how much to sell the house for.

If you have a mortgage, you will need to refinance the house to buy your spouse's interest. For example, if the mortgage balance is $200,000 and both of you have an equal amount of equity that is $100,000 each, you would need to acquire a new loan of at least $300,000.

This would allow you to pay your spouse $100,000 and pay $200,000 for the remaining balance to obtain full ownership of the house.

Co-Own

You may opt to continue owning the house together, for example, if you do not want to move the children, the market is unfavorable for selling, or as part of a long-term buyout process.

Co-owning has numerous risks for your credit report in case of missed or late mortgage payments and taxation implications for transferring property long after finalizing a divorce.

Whether you decide to sell together, buy out, or co-own your family house in a divorce, be sure to weigh the benefits and downsides of each option. If you want a divorce and the house is at stake, speak to the qualified attorneys at Armstrong, Betker and Schaeffer, PLC to understand your legal options.