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Distribution of Your Home: The Options

July 10, 2019  | 

{3:30 minutes to read} In my last video, I promised some creative win/win options that you could take when it came to the division of your home. Since they could be a little complicated and hard to follow, I thought it would be better to present them in a written blog. 

 

Can’t Refinance Right Now

Let’s say that you both agree that there will be a buyout and a refinance, but it will take some time for the “buyer” to qualify for a loan, and the “seller” needs the money from the house to do the buyout. If there is an equity loan or other assets available, the seller could get enough funds as an advance on his or her share of the house equity to allow the move out.
 
If an equity loan is used, you would have to agree upon how to pay the monthly interest payments. The principal balance would be the responsibility of the buyer. In this scenario, the agreement will provide that the buyer will refinance in a set period of time, and if denied, perhaps have one or two more chances to refinance before a firm date is set for the sale of the home. 
 
No Equity 
 

If the mortgage is higher than the value of the home, the home can be a liability as opposed to an asset. In this situation, I’ve had couples either agree to remain in the home together until there is enough equity to sell the property, or one of them lives in the house and pays most of the mortgage and tax expenses, while the other pays something to be able to share in the equity of the house, once the mortgage is paid down enough to sell. I’ve had clients agree to this type of arrangement even though there is no spousal support to be paid and no minor children living in the home. The advantages are preserving their credit rating and ultimately, getting some equity from the home. 

 
No Cash Flow to Move Out  
 

Let’s say that you’ve agreed that mom can remain in the house with the children; both of you agree that dad should leave the home as soon as possible; but dad has limited cash flow to be able to pay the rent and pay support. If your budgets show that mom can pay expenses for the home and the children without monthly child support from dad, I’ve had clients agree that the monthly support amount — that dad would normally have paid — would be considered a credit against his share of the equity in the house. As a result, dad had the cash flow to move out and pay rent, while mom got to stay in the home with the children and not have to come up with the cash to buy out dad.

If someone is assuming the mortgage for any period of time, you will always need to discuss what happens if a payment is not made by the person responsible for the mortgage payments, as this can affect the credit rating of both parties. Also, the person who moves out but remains named on the mortgage may be unable to purchase his or her own home and qualify for a mortgage, so this will also need to be discussed.

When divorcing, making decisions about the marital home can be complicated and difficult, but when you work collaboratively with your spouse, much can be accomplished. 

Clare Piro Attorney and Mediator

Attorney & Mediator
500 Mamaroneck Avenue | Suite 320
Harrison, NY 10528
Tel: 914.946.0848

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