Divorce: it is messy, complicated, and so common that it has become part of the cultural norm. Everyone knows someone –– a colleague or a relative, for example –– who has gone through a divorce. However, the frequency of divorce in America does not lessen its effect on the affected parties. It is easy for us to empathize with the emotional toll of divorce. What is perhaps more challenging for us to consider are the financial consequences.
When two people share a life together, they also share things: mementos, housewares, cars, and in many cases, a home. The division of these assets is often as painful as the end of the marriage itself, but it is essential to maintain pragmatism through it.
If you are a homeowner going through a divorce, consider some of the ways that this life event could potentially impact your responsibilities as a property owner, and what some divorced couples choose to do about it.
Fair and Square: Sell the Home
In this complex emotional time, there is so “simple” answer for how to handle joint property. Perhaps the most straightforward solution is to sell your home.
Selling your home comes with a lot of potential pain. The home likely has significant sentimental value to the couple and their children, if they have them. While you cannot divide a house in half, you can divide a check. Selling your home leaves the divorcees with an opportunity for a clean financial break. Once the property sells, the couple can split the profits evenly and clear the loan.
Should I Stay or Should I Go? When One Party Maintains Ownership
Another potentially complicated but common option for property owners going through a divorce is for one party to maintain ownership of the home. This option requires that one partner settles the contribution of the other, and then refinances the home under their own name. The challenge of taking this route is that the party left with the property has to refinance using only their income, which lenders may not feel is sufficient to make them eligible for a new loan.
Talk to a Lawyer
While we would like to maintain the fantasy that all divorces have the capacity for amiability, it would be impractical to do so. Divorce is a landmine, and each party needs to do what they can to navigate the situation without getting too bruised up. Regardless of good intentions, it is probably a smart idea for each party to consult with a lawyer, who can act as an unbiased resource during the process of evaluating what to do with joint property.
If you’re a property owner concerned about the impact that your divorce will have on your credit, contact a professional with Lexington Law. These experts can address your concerns and help you decide the best way to protect your financial future.