When a Florida couple begins the divorce process, one of the primary areas of focus is how to divide marital wealth. For spouses who own a home, that investment is often the most significant asset at play during the property division process. Handling the family home is a divorce issue that can have lasting negative ramifications for both spouses, if not handled properly.
Each and every couple is unique, and what works for one will not necessarily work well for another. That said, many couples who decide that one spouse will keep the home while the other takes his or her share of equity will come to regret that decision. This approach is best suited for couples who both have stable and well-paying jobs, or situations in which each has already amassed sufficient wealth to cover the cost of the property.
When one spouse stays in the home, the other must be paid his or her share of the accumulated equity. If there are other assets that can be used to cover this amount, the matter becomes simplified. For many, however, the only way to pay off the departing spouse is for the retaining spouse to refinance the mortgage and cash out a portion of the home’s equity. That leaves the retaining spouse with a new mortgage obligation that may be difficult to cover.
The spouse who walks away can also be negatively affected if the retaining party is unable to refinance the home. In such cases, both parties will remain listed on the mortgage. The departing spouse will not have any ownership rights to the home, but he or she will be considered a responsible party in the eyes of the lender. If payments are late or the home goes into foreclosure, credit damage can follow.
The best way for Florida spouses to approach the family home during a divorce is to be fully informed prior to making any major decisions. This in line with most advice on financial matters. The decision whether to keep or sell the family home is one that is too often made based on emotion, rather than reason. Spouses should take an objective approach and make the property division choices that best supports their future financial goals.
Source: The New York Times, “Divorce and the Shared Mortgage“, Lisa Prevost, Oct. 30, 2015