Is it easier to get rid of the spouse or the house?
In many Texas divorces, the house is one of if not the major asset to divide in the property division part of the divorce. And it causes some of the most friction between the divorcing spouses. Maybe the spouse wants to try to keep the house; or, maybe the spouse wants to sell the house and take a share of the sales proceeds to buy a new house. It is important to make decisions about the house that are not based on pure emotion. The financial realities are important as well.
Here are some questions important to making decisions about what to do with the house in divorce:
- What is the fair market value of the house?
- How much equity is there in the house (value less debt)?
- How much is the monthly payment on the house?
- Are taxes and insurance escrowed or will those need to be paid annually from other funds?
- Is the spouse that wants to keep the house employed making sufficient income to meet the financial commitment of the house?
- What other assets are available in the division to accommodate awarding the house to one spouse?
- Are there cash assets available to cover other emergency expenses?
- How will maintenance be handled?
- Is there a reason to refinance the mortgage?
Sometimes it is helpful to have the spouse who wants to keep the house meet with a financial planner to evaluate cash flow and asset management. This person can help the spouse decide if keeping the house meets with that spouse’s long term financial goals.
In Texas, generally a judge cannot order a spouse to refinance the house. Where the mortgage debt is incurred by both parties, both parties will continue to be named on that debt afterwards. The spouse agreeing to pay for the house will usually execute a deed of trust to secure the assumption of the mortgage. This document gets filed in the deed records and provides the exiting spouse a remedy if the other spouse fails to make the payments.
Another problem to consider in deciding what happens to the house is that post-divorce, many people — especially women — have a lower credit score after divorce than during the marriage. Combine this with the reality that a single person has one income versus the possible double income of two working spouses, so after divorce, it may not be as easy to get approved for the mortgage to buy a new house.
There are many factors that need to be considered surrounding the house in a divorce. The advice of a good divorce lawyer and even a financial planner can be very helpful in making these decisions.