Real estate is easy. Either one or the other of you keeps it, in which case you refinance the mortgage to remove your spouse from liability, or you sell it and split the proceeds. There’s not a lot of options, so we can often cut to the chase pretty quickly.
I want to keep the house.
Great! I get it. It’s an emotional thing. You’ve had some good memories there – where you brought your kids home from the hospital, where you watched them take their first steps, all that. There’s also just that warm, fuzzy “home” feeling that it has that you probably can’t imagine feeling anywhere else.
First thing’s first. Can you afford the home? I don’t just mean the mortgage – I mean taxes, insurance, utilities, and repairs. What about other things – like lawn maintenance – that your husband may have previously handled? Can you do it yourself, or afford to have someone else do it?
You can? Great. Now, you’ve also got to qualify to take the mortgage on. And not just the existing mortgage balance; you’ll have to refi to buy out your husband’s marital interest in the property. That may or may not be a big deal, but you’ll need to have some kind of plan in place for how to qualify for the mortgage plus his marital share.
Who pays for the refi?
The person doing the refinancing! If he’s going to refi the home into his name, he’ll pay for it; if you are, it’s your expense.
I want to refinance my house (or my husband does)
If he’s going to refi, when will I get my share of the equity?
Through the refinance. You probably shouldn’t do anything with the home unless and until you’ve got some kind of agreement hammered out that specifically sets forth exactly what should happen, and there should be something in there that entitles you to information while the refinance is processing, and then to receive your payment when it is completed.
How much is the marital share?
A party’s marital share is roughly 50% of the equity (or liability, in the event that there’s no equity) in the home that resulted directly from the contributions made during the marriage.
Is that confusing? Let me explain. In Virginia, property can be either marital, separate, or hybrid. If it’s marital, in the case of a house or other real property, it was purchased during the marriage and paid for entirely using marital money. In that case, the equity would be purely divided 50/50.
If a house is a separate asset, then it was purchased and paid for prior to the marriage. It could also be separate if it’s not paid off, but non-marital money was used to maintain the home during the marriage. That could happen if, for example, the home had tenants in it the entire time (and no major renovations took place using marital money) or if the mortgage payments were made from separate money – money that one spouse had prior to marriage, money that came from a gift or inheritance from someone other than the other spouse, or if disability payments or a personal injury settlement or something similar went into the house instead of marital money.
If a house is a hybrid asset, its part marital and part separate. That could happen if it was purchased prior to the marriage, but then upkeep and subsequent mortgage payments were made from marital money. In that case, the equity might not be divided purely 50/50; instead, we would have to separate the non marital portion from the marital portion, and only divide the increase in equity that is attributable to the marital contributions.
When the real estate is underwater
A big issue we sometimes run into is when a piece of real property is underwater. In these cases, either one or the other spouse will agree to keep it, or, alternatively, the parties can sell it. If the house is underwater, though, then it may very well be that the parties have to actually bring money to closing to get rid of it.
Again, a contract (like a separation agreement) should govern the decisions you make here, and you should work through all the details before you make any big decisions. Make sure you protect yourself by putting it all in writing so you can ensure that your husband will uphold his end of the bargain.
If cash has to be brought to closing, there should be a specific agreement detailing where that money will come from. It’s not an ideal situation, but especially since the market crash in 2007-2008, we’ve seen lots of people with houses that are underwater.
For more information or to schedule an appointment with one of our licensed and experienced Virginia divorce and custody attorneys, give our office a call at 757-425-5200.