Co-Owning a House After Divorce: All You Need to Know
Divorces can be messy in more ways than one. In the aftermath, marital property must be split. And while that might work with some investments, it can be tricky when it comes to your house. So, what happens to the house in a divorce?
Sometimes, couples decide that sharing a house after a divorce may be the better decision, especially when there are kids involved. That way, they can always decide whether to sell it at a later point or have one party buyout the other.
If you’re in such a situation, you might wonder if co-owning a house after a divorce is a good decision, how it would impact the divorce and mortgage, and whether there are other solutions. This guide on jointly owned property after divorce has you covered.
Can You Jointly Own Property After a Divorce?
If your home is owned free and clear, the answer to this question is much more straightforward. Yes, you can jointly own marital property even if you are divorced, although the paperwork will likely need to be amended.
However, having a jointly owned property can complicate things once the marriage has ended. If both parties have two incomes, they typically have three options:
- Sell the house – Mortgages are expensive, and many people won’t be able to qualify for a mortgage without the benefit of a dual salary. If neither party is able to afford the home upkeep and mortgage payments, selling the marital property, paying off the loans, and splitting the profits is often the natural conclusion.
- Deferred sale – If a couple has kids, they may opt to continue to have a joint property after divorce, for a given period of time, in order to minimize the impact it has on their life. Typically, this will continue until the kids finish school. During this time, the custodial or designated parent lives in that home with the kids. The home will then be sold at a later date and the profits split.
- A buyout – In some cases, divorcing spouses will agree to have one of the parties buyout the other. A divorce house buyout will require a deed transfer and either a loan reassignment or a refinance.
In the case of amicable divorce proceedings, the two parties can agree upon the most favorable option. Some decide that it’s better to wait for the market to improve before selling and stay on the mortgage even after the dust has settled. But in the case of an uncivil, litigated divorce, it’s often left to the court to decide how the scenario will play out.
Pros of Sharing a House After Divorce
There are several reasons why a divorced couple may decide to continue co-owning a house after divorce. They include:
- Stability for kids – Children need stability in their lives to thrive. Divorce has a significant potential to upend that. But allowing the kids to stay in the home with their custodial parent mitigates further disruption.
- A higher eventual sale price – If the real estate market is in a downtrend, it may be worth it to wait for a correction with a deferred sale.
- A future buyout – If neither of the divorcing spouses has the capital to perform an initial home buyout, they may need to create a payment plan where they gradually purchase equity over time.
- Nesting – Some couples with joint child custody, decide that instead of forcing kids to spend periods in two different homes, the parents will take turns spending time in the family home. This ensures that kids get to stay in their beds, in their neighborhoods, and in their family setting with as little interruption as possible.
Cons of Sharing a House After Divorce
Naturally, there are also arguments against staying in the house after divorce proceedings. They include:
- Accounting – If you do decide to split the house and file a quitclaim deed, you will need to negotiate terms and clearly agree in writing. You’ll also need to track how each party pays its share of the mortgage, home expenses, and upkeep.
- Credit reports – If you both continue to own the home, your credit reports will state the entire mortgage amount. And if your ex spouse fails to make mortgage payments, that could affect your credit rating.
- Emotional toil – Even amicable divorces can be complicated. When sharing a home, you will still have to regularly interact and communicate. Some individuals have trouble maintaining healthy boundaries.
Co-Owning a House After a Divorce with a Sale-Leaseback
Co-owning a house after divorce is an option, but it’s not always the best path forward when both parties want to start with a blank slate. But at the same time, the process of selling a home while searching for a new real property can be daunting.
But you have other options.
With a sale-leaseback, you can convert your home equity and stay in your house for as long as you need. You sell your home, convert your home’s equity to cash, and lease it back for however long you, your spouse, or the both of you need.
Make your house one less thing to stress over during a divorce.
Divorces can be messy in more ways than one. In the aftermath, marital property must be split. And while that might work with some investments, it can be tricky when it comes to your house. If you are still unsure of housing options after a divorce after reading this article, consult a financial advisor to discuss your options.
- 1900 Law. Deferred Homes Sale. https://www.1900law.com/deferred-home-sales/