DISCLAIMER: As a friendly reminder, this blog post is meant to be used for educational purposes only, not legal advice. If you need assistance navigating the legalities of keeping your home in a divorce, HomeLight always encourages you to reach out to your own advisor.
You’ve already made the hard decision to divorce. You need to plan and determine how to keep the house in a divorce. Maybe you are weighing your options and wondering if you should even try to keep the house.
The answer is, it depends. There are a lot of reasons why you want to keep the home:
- Concerns over being able to afford a comparable home
- Desire to stay close to family or close friends
- Emotional memories tied to the home
- Seeking stability in an unstable situation
- Sentimental attachment to the house or neighborhood
- Strong community ties (church, work, neighbors)
- Want to keep your children in the same school district
Your reasons may be more emotional than practical, but it can be helpful to adopt a pragmatic approach in deciding whether you want to keep your house in the divorce.
First, familiarize yourself with your state’s laws on property division and the divorce waiting period. Then, you need to evaluate your finances to ensure that you put yourself in an excellent financial position in the future.
Maybe instead of asking how to keep your house in the divorce, you should be asking, “should I keep the house in a divorce?”
Use this step-by-step guide to determine if keeping the home is the right move for you.
When one spouse is attempting to keep the house, it’s important to remember that you can’t qualify for as much as a single person.
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How to keep the house in a divorce: Take it step by step
You’ve decided to keep the house in the divorce. Now, you want to start the process of keeping your home.
First, you need to figure out if keeping the house is financially viable. Then, determine the home’s value. Finally, you will remove your spouse’s name from your deed.
Before continuing down this path, you need to take a hard look at your finances and determine if you qualify to refinance with only you.
“When one spouse is attempting to keep the house, it’s important to remember that you can’t qualify for as much as a single person,” advises Dawn Fore, a top Texas real estate agent and divorce specialist who works with 72% more single-family homes than the average Houston agent.
Step 1: Evaluate your finances
You have to be able to afford to keep your home. There are a lot of things to consider when making that determination.
Keeping a house when you cannot afford it is a common mistake people make when getting a divorce. People do not anticipate the actual cost of owning and maintaining a home.
“Can you pay the mortgage, property taxes, homeowners insurance, and maintenance? There are many hidden costs that homeowners incur,” says Denise Erlich, an Illinois attorney that specializes in divorce and family law. “You should not simply be comparing the monthly mortgage to the cost you would pay to rent a residence. Utilities are probably two times the cost in a house than an apartment.”
You don’t want to give up your rights to other assets to secure the house, only to find out that you can’t afford to keep the home.
If you have a mortgage on the property, you have to prove to the court that you’re financially stable enough to pay for the following:
There are other things to consider beyond your ability to secure the home from your ex and prove your financial stability. Even if keeping the house is a viable option for you, it might not be the best financial move.
What are you willing to sacrifice to keep your home in the divorce?
You will have to decide what you are willing to give up in exchange for keeping the house. There are consequences for keeping an expensive home as part of your divorce settlement.
One potential consequence is the capital gains tax. You may have to pay tax on some capital gains you make when you eventually sell the home. That amount of tax burden might eat up an unexpected chunk of your equity.
Here is an example of how the capital gains tax exclusion might work for a married couple:
- You and your partner sell your house for $501,600 profit before or during a divorce
- You’ve both lived in the home as your primary residence for at least two of the five years before the sale.
- Up to $500,000 ($250,000 each) is typically exempt from the sale of your home.
If you decide to take the house in the divorce, this is how the capital gains tax exclusion might work for a single homeowner:
- You sell your home for $500,000 profit.
- You can typically exempt $250,000 if you’ve lived there for two years before selling.
- You will likely pay capital gains tax on the remaining $250,000.
(Note: The exclusion may be reduced if you purchased the house less than two years before the sale. Also, the five-year period can be extended if either spouse is actively serving in the military, depending on the circumstances. Always consult with your financial advisor or tax professional to determine what’s best for your situation.)
Another potential consequence is the assets you might exchange to offset the house price.
Step 2: Figure out the best way to pay for it
There are a few ways to pay for the home post-divorce. You could buy out your ex’s equity with your own assets, or you could try a cash-out refinance which would release your ex’s equity and allow you to remortgage it, along with the remainder of the mortgage. Of course, you’ll need to qualify for the mortgage on your own.
Let’s take a look at how you might pay for the home in three different scenarios:
- If the house is paid off
- If you still have a mortgage but have some equity
- If there is little to no equity in the home
How to keep the house in a divorce if it is paid off
When you divorce, the home is likely the most significant and most valuable joint asset controlled by your state’s division of property laws. The court typically divides the equity in the house.
When you want to keep the house following a divorce, you may need to use your other assets to offset your ex’s share of the equity in the home.
Here is an illustration of what that means:
Suppose you and your ex have $300,000 equity built into your home. You decide you want to keep the house, and your ex agrees to let you keep the home. In this scenario, you will typically be responsible for paying the $150,000 to your ex for their share of the equity built up in the house.
If you do not have enough cash to offset the cost of the home outright, then you may need to give up your claim to other marital assets, which can include, but are not limited to:
- Brokerage or investment accounts
- Different types of personal property
- Reduction in alimony
- Retirement accounts
- Vacation homes
When you choose to offset your ex’s half of existing equity in the home, it doesn’t remove their name from the mortgage or deed. You will need your ex to sign a quitclaim deed to remove their name from the property.
Another thing to consider is that you may not have enough assets to offset the home’s value. If that’s the case, you will need to secure a loan to pay your former spouse their share of the equity.
If you decide to get a loan, make sure that you have enough cash to cover the loan payments, taxes, insurance, and repairs for the house.
How to keep your house in a divorce if you still have a mortgage
When there is a mortgage on the home, keeping it is more complicated. In many cases, the simplest way to keep the house in a divorce if it still has a mortgage is to refinance.
The best-case scenario is for you to refinance and remove the mortgage from your ex’s name altogether. You’ll need to qualify for the mortgage on your own, so make sure to have all your financial ducks in a row.
Here again, if you don’t have the cash to pay for the house outright or other assets you can leverage, you will probably need to refinance just to pay your former spouse’s half of the existing equity.
Here are some things to consider when refinancing:
- You’ll be refinancing for the existing balance of the original loan
- You’ll need to add your ex’s half of the current equity to the actual loan total
- You’ll need to qualify for the larger loan with your income alone
In general, lenders cap refinancing a mortgage at 80% of the home’s total value. If your debt and your partner’s equity combined push you past that cap, you may not qualify for the mortgage on your own.
Here is an example of what that means:
Suppose your home’s value is $600,000 and your existing mortgage debt is $400,000. You have current equity of $200,000. Your ex’s share is $100,000.
As a result, you need to refinance for a $500,000 mortgage (existing debt + ex’s equity share). But your lender caps the refinance amount at 80% of your home’s value, or $480,000.
In this scenario, your options will be to:
- Secure an additional $20,000
- Negotiate with your former spouse to accept $20,000 less
- Not refinance the house
How to keep the house in a divorce if there is little to no equity
Do you want a home with little to no equity? Why?
Maybe you’ve decided that it’s the right choice for you. One word of caution – don’t let your emotions control this critical financial decision.
You can negotiate with your former spouse to keep the mortgage the same with both your names on the title or deed. But, you must dictate who is financially responsible for the mortgage payments and other expenses that may arise.
Keep in mind that if a payment is missed and both your names are on the mortgage, the lender views both parties equally responsible. Consequently, missed payments negatively impact both your credit scores.
Step 3: Determine the value of the home
How much is your home worth? Just like a divorce, the answer to this question can be complicated.
In general, you can determine your home’s worth by:
- Checking comparable sales
- Getting a comparative market analysis
- Getting a new appraisal
- Using HomeLight’s Home Value Estimator as a starting point (and follow up with a real estate agent or appraiser)
Determine your home’s worth by checking comparable sales
Take a look at comparable sales or house comps. It is a process of aggregating and analyzing similar, recently sold houses.
Comps are a crucial tool in adequately evaluating your home’s worth. Both real estate agents and appraisers take into account the following criteria when pooling comps:
- Square footage
- Number of rooms
- When you built the house
- Desirable amenities
Determine your home’s worth by getting a comparative market analysis
You should find the current market value of your home from a real estate agent to get a comparative market analysis (CMA).
That is just the first step, and the value may change over time. Divorce may take a long time, especially in states with a divorce waiting or “cooling off” period. Your home’s value will likely fluctuate with the real estate market.
“When you’re trying to figure out how much to buy your spouse out for, you need to remember that the preliminary market analysis you get from an agent isn’t the final number for your home’s actual value,” explains Fore.
“I’ve seen home values change in just a matter of months based simply on the time of year. For example, let’s say we provided the home value in the fall, but the divorce and the home buyout didn’t go through until spring, which is when we see home values increasing.”
One thing to consider is that CMAs may value your property for the most money possible. That type of valuation is not helpful when trying to buy out your ex.
During a buyout, you are the buyer. Your former spouse is the seller. You may want a lower home value. In contrast, your ex may want to get the highest possible value so they’ll get more cash for their equity interest.
So what should you do to determine the home’s value? It might be best to get a new appraisal.
Determine your home’s worth by getting a new appraisal
A new appraisal is almost always a lender-required condition of refinancing your home. Beyond the lender requirement, it is also good to get a new appraisal to get a starting value for your divorce negotiations.
“This may require hiring an appraiser to give an appropriate valuation. If you are wanting to keep the house, you will want that appraisal to be as close to the amount owed on the mortgage as possible,” says Brent Morgan, a Texas attorney who specializes in divorce, child custody, and family law.
Depending on your situation, it may be worth spending the $450-$550 for an outside appraisal to make sure that your home is valued appropriately.
Here is the bottom line:
- During a buyout, you’re the buyer
- Your ex is the seller
- You will need to determine the home’s value
What to do if it makes more sense to sell the house and move on
After going through your financial checklist, you might decide that selling the home is the best thing to do. Selling may enable you to make a clean break and find more affordable housing, a fresh start.
If starting anew is the right choice for you, here are the steps you need to follow.
Step 1: Hire divorce specialists (that both spouses trust)
When selecting a divorce specialist real estate agent, “do your homework,” Erlich advises. That means thoroughly vetting your agent and asking them lots of questions.
Erlich suggests asking potential agents:
- Is the divorce specialist qualified?
- How long has he/she been working as a divorce specialist?
- Does he/she have a good reputation?
- Is he/she affiliated with a larger organization that provides ongoing training?
- Can the divorce specialist refer you to other qualified and vetted individuals you may need in the divorce process?
- What can you expect the total cost of their services to be, absent something unusual occurring?
Selling the house and splitting the proceeds during a divorce is less complex than keeping the home, but it probably won’t be free from disagreements. After all, both you and your ex’s financial security is at stake.
It is helpful to find someone you both trust when tackling financial situations.
“Using a financial neutral is always the best choice if the parties are agreeable to working together through their financial issues,” says Lisa C. Decker, a certified divorce financial analyst based in Georgia that specializes in helping couples and their attorneys achieve equitable divorce settlements.
“Make sure your legal and financial experts are certified in divorce. If parties choose to work independently, working with settlement-minded professionals is always better. Litigation should be a last resort only, as it is the most expensive and least predictable path,” Decker advises.
How do you settle on one agent without the selection process becoming contentious?
You could use rank choice voting. You and your ex interview the agents individually and rank them according to preference. Then, give your respective list to your attorneys, who will select the highest-ranked agent from both lists.
Step 2: Agree on the details of the home sale
You’ve jointly decided to sell the house. That’s a significant step in the process of moving on.
Here is a list of things you need to consider as you agree on the details of the home sale:
- Appropriate list price
- Lowest offer you’re both willing to take
- Repairs to make or not make
- Value of upgrades
- Whether to sell “as is” or not
Step 3: List, sell, and settle
You are at the point where emotions may flare and battle lines appear. If you plan and expect some of the pain points of listing, selling, and settling, you will be able to control your emotions and have a smooth sale.
Here is a list of challenges you and your ex may encounter:
- Agreeing on how to handle buyer concessions, credits, or repairs
- Agreeing on which offer is the best for both parties
- Arranging both of your schedules around showings
- How to divide up the proceeds after the sale
- How the home sale proceeds fit in with negotiations over other assets
- If one spouse is focused on moving on and the other on making the highest profits
- Managing property division laws
- The stress of keeping the home clean and staged
- Tensions regarding which spouse will be living in the house during the sale process
After the sale, the property division laws of your state help determine how the profits and proceeds are divided.
After the home is sold, you may be able to give up your claim to some physical assets or personal property in exchange for more cash from the profits of the sale.
For example, your ex wants sole ownership of the family boat. You can exchange your interest in the family boat and ask for cash proceeds from the home sale.
Q&A: What else to consider when deciding whether to keep the house
Does the wife or husband always get the house?
Not always. The person who gets the house may depend on who has:
- Primary custody over school-aged children
- Emotional attachment
- Financial ability to pay for the home
Can I force my spouse to leave home during our divorce?
It depends on the state law controlling divorce.
However, in general, if you and your spouse bought the house together, or if one party bought the house during the marriage, you will likely not be able to force your spouse out.
A generally recognized exception occurs when:
- The home isn’t marital property
- Child abuse occurs
- Domestic violence occurs
What is a common reason that neither spouse keeps the house?
It might be the case that neither party can afford to pay the mortgage. If that occurs, then the court decides on another outcome.
Keep or sell? Ask yourself these 8 questions before you decide
Elrich suggests that you ask yourself the following questions when making the decision:
- Can you afford to pay the mortgage, property taxes, upkeep and not be “house poor”?
- Can you and the children (if there are children) still go on vacations and live a similar comfortable lifestyle that you enjoyed before the divorce?
- What rental options are there (cost, location, etc.), and what would those rental costs be?
- Is there anywhere you can live to pay off debts and save money so that you can save up for a down payment? Think long-term.
Decker encourages you to examine the following financial questions as you make your decision:
- Am I able to qualify for refinancing?
- What significant expenses or repairs can I expect in the next couple of years?
- How will I afford the monthly payments for the life of the mortgage?
- Can I find another place in this school zone or a similar commute?
Don’t be overcome by emotions and let them drive your decisions. Instead, make sure to consult your attorney, divorce specialist agent, accountant, or financial planner before making any decisions.
Another thing you should consider is finding a top-rated agent for additional expert advice about selling your home and for a comparative market analysis.
Use our Agent Match tool, which analyzes over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.
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