Of all the assets that you and your spouse own, it is likely that your home is the most important. For most of us, it is the single biggest investment we will ever make and will stand as our most valuable asset over the course of time. Not only is it that important from a financial perspective but it has emotional and psychological importance as well. We raise our families in the marital home. We open up our homes to ailing relatives. Memories, both good and bad, are made in that home. To everyone else in the world it is a building with four walls a roof but to you and your family, it is so much more than that.
This is what makes divorce even tougher. Not only are you and your spouse splitting up from one another and causing an emotional and physical rift between one another but you are changing the lives of your children and anyone else that lives in your household. Putting aside the emotional components to a change in the relationships between you, your spouse and your children, it is likely that one or both of you and your spouse will no longer be calling your marital home your "home" much longer. Moving is a part of a divorce in the same way that changing last names and visitation schedules are.
One of the questions that I am frequently asked by husbands and wives alike is how can a person best figure out a way to keep their house in a divorce. On its face, it wouldn't seem like an overly difficult thing to do. After all- you have lived in that house for years and have established a foothold there. Shouldn't it be as easy as asking for and negotiating to keep the house in the divorce? What other considerations are there when it comes to you keeping your house after the divorce has concluded?
Well, a house represents an emotional as well as a financial investment. These two component pieces cannot be separated without some effort. I can tell that it is not very often that a person looks at the home where they raising their children as just another that could be bought and sold without much regard for any other factors. We’re all human, after all.
The attachment to our house is representative of the attachment that we have the memories that were created in that house as well as the stability and consistency that this life once represented for us. Now that you and your spouse have entered into the divorce process that stability and consistency are now fading right before your eyes. So, the desire for many people in your position to keep their marital home after the divorce is wrapped up is as much about the financial implications associated with having to find a new place to live as it is about the stability that your home has and should continue to provide you with.
Divorce is about two things: children and asset division
Two become one is the general concept of marriage in most societies. Your marriage (ideally) is not a joint venture where you and your spouse looked at one another years ago and decided that it would be advantageous from a resources vantage point to come together to form a partnership. Rather, I’m reasonably sure there was a strong emotional, physical and relational component to your marrying your spouse. If there wasn’t then that probably explains a great deal as how you find yourself engaged in a divorce.
If you and your spouse have children it is probable that you also have a house. You share your children and you share that house. That’s all fine with you both considering how your lives became one life when you got married. However, when you come to the realization that your marriage is no longer workable and that a divorce is what needs to happen for the betterment of your children and one another, that equation changes in a significant way. The things that you shared with your spouse (those kids and that house) are no longer shareable. Rather, you both are preparing for a return to having your own life. Two people, two lives but one set of children and one house. The math is already catching up with us.
What ends up happening is that divorce ends up being an algebraic equation where your life goes on one side of the equals sign and your spouse’s life goes on the other. All of your assets and all of the rights/time with your children go into the equation. Your job and the job of your attorneys is to divide those assets and those rights/time up between the two of you. You cannot create more of any of those variables and you cannot decrease any of them either. The job is to divide it all up just as it stands between both sides.
As I’m sure you can imagine this is much easier said than done. Your family has its own particular circumstances to be concerned about just as any family going through a divorce does. While a judge could probably do a decent job of dividing those variables up between you and your spouse it probably wouldn't work out all that well for you and your family due to those circumstances. You and your spouse, despite your current attitudes towards one another, are undoubtedly in the best position to know how to best allocate those resources between the two of you. That is why courts encourage parties to work together to settle cases without intervention by courts.
What to do with the marital home
The question that most married people want to know prior to engaging in a divorce is what will end up happening with the house. We can twist and turn the question all sorts of different ways but as it stands at the end of divorce is you and your spouse will want to know what sort of financial impact the divorce will have on your housing and living situation.
Suppose that you decide that you want to remain in the house after the divorce is over with. You negotiate for this with your spouse and their attorney and eventually, you arrive at a settlement whereby you are allowed to keep the house. How can you make this negotiated upon victory a reality for you and your family if you do not have the cash on hand to buy your spouse out from their share in the equity that your house has built up over time?
A refinance of your home may be in order if you are low on cash or assets
I would not recommend that you refinance your mortgage in the event that you have other assets that can roughly equal the value of the equity that your spouse is owed in the divorce. However, if your marital home represents the vast majority of the liquid assets that are available to you and your spouse then a refinance may be your best option under the circumstances.
Just to make sure that we all are on the same page here, when we talk about equity I am referring to the value (as measured in dollars) that your house offers above the amount owed on the home. Basically, take the value of your house and subtract the amount that is left on your mortgage and you have the equity in the house. Theoretically then, you would need to divide that equity between you and your spouse in some form or fashion. Usually, it amounts to a 50/50 split but your circumstances may demand that the ratio is altered in some way to account for other variables.
To access the cash that you would need to pay your spouse their share of the equity in exchange for leaving the marital home you can attempt to refinance the mortgage. A refinance will remove your spouse’s name from the deed in exchange for allowing you to cash out any equity in the home. Essentially you will be getting rid of the former mortgage by “selling” it to the company that you are taking out the new mortgage from. You can take the equity, give your spouse their share and then use the remainder as a down payment to decrease the monthly mortgage amount. There is no guarantee that you will qualify for a refinance, however.
Refinancing a mortgage is a better option than merely taking your spouse’s name off the deed to the house
A lot of people believe that the most straightforward method for dealing with this issue is to simply remove their spouse’s name from the deed on the house. For instance, some family law attorneys will have their clients sign a quit claim deed which removes your spouse’s name from the deed. Your spouse would no longer be an owner of the home and would have no legal right to enter it.
The part of the set-up that this plan overlooks is that it does nothing to absolve your spouse's liability for any missed payments that you make on the mortgage. In Texas, most title companies will not ensure a closing unless you and your spouse are a part of the transaction. Therefore, your spouse would bear responsibility moving forward if you failed to pay your mortgage as required.
A refinance would solve the main issue from your spouse’s perspective- that of financial liability moving forward after the divorce has run its course. Refinancing the mortgage is not something that should be started a week before your prove up hearing. Rather, I would recommend that as soon as you all know that one of you is going to remain in the home and that a refinance is going to be (ideally) part of that reality, the person who is going to stay in the house needs to contact a lender and begin the application process.
The mortgage that you and your spouse currently have is likely based on the credit scores and assets of both of you. The lender that you choose to go with for the refinance may not be as excited about refinancing a mortgage in one spouse’s name because their income, assets or credit score may be lacking in some regard. By applying for a refinance early that gives you an opportunity apply with a different lender if you are not approved initially or waiting until your income or credit score (or both) improve over the course of your divorce.
Can you protect yourself financially if you want to wrap up the divorce but the refinance has not yet been approved?
Your final decree of divorce should include language that you are attempting to refinance the home. There is no guarantee that you will be able to refinance, however, so both you and your spouse are taking a financial risk by moving forward with the divorce finalization before this final step is completed. Your spouse would still be liable under the current mortgage. A Deed of Trust to Secure Assumption is the usual antidote to this issue. It will allow your spouse to have the right to foreclose upon the house if you fail to refinance the mortgage and begin to miss payments on the current mortgage. Your spouse can notify your lender of the divorce and the Deed of Trust to Secure Assumption so that he or she can be notified after any missed payments of yours
Questions about divorce, mortgages, and finances? Contact the Law Office of Bryan Fagan
If you have any questions about today’s blog post please do not hesitate to contact the Law Office of Bryan Fagan. We offer free of charge consultations with our licensed family law attorneys six days a week here in our office. It is our honor to meet with you as a member of our community to answer your questions and address your concerns in a comfortable, pressure-free environment.
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Other Articles you may be interested in:
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- Can I buy a House During My Texas Divorce?
- What does Insupportability or No-Fault in a Texas Divorce Mean?
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- When is, Cheating Considered Adultery in a Texas Divorce?
- 6 things You Need to Know Before You File for Divorce in Texas
- The Dirty Trick of Hiding Assets During Your Texas Divorce
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- Know How Property and Debts are Divided, When Preparing for Your Texas Divorce
- How Much Will My Texas Divorce Cost?
Law Office of Bryan Fagan, PLLC | Spring Divorce Lawyer
The Law Office of Bryan Fagan, PLLC routinely handles matters that affect children and families. If you have questions regarding divorce, it's important to speak with ar Spring, TX Divorce Lawyer right away to protect your rights.
A divorce lawyer in Spring TX is skilled at listening to your goals during this trying process and developing a strategy to meet those goals. Contact Law Office of Bryan Fagan, PLLC by calling (281) 810-9760 or submit your contact information in our online form. The Law Office of Bryan Fagan, PLLC handles Divorce cases in Spring, Texas, Cypress, Spring, Klein, Humble, Kingwood, Tomball, The Woodlands, Houston, the FM 1960 area, or surrounding areas, including Harris County, Montgomery County, Liberty County, Chambers County, Galveston County, Brazoria County, Fort Bend County and Waller County.