For many people going through a divorce, the house is more than the largest asset they own. It is where they raised their children, built their routines, and expected to stay for years. So one of the first questions I hear is: “Am I going to lose my house?”
The short answer: not necessarily. New Jersey does not automatically require you to sell the marital home when you get divorced. But there is also no automatic rule giving either spouse the right to keep it.
Usually, there are several possibilities. One spouse can buy out the other, the house can be sold and the proceeds divided, the house can be exchanged against other marital assets, or the sale can sometimes be postponed.
Before deciding which option makes sense, however, you need to understand what the house is worth, how much equity you actually have, and whether either spouse can realistically afford to keep it.
If you purchased the house during your marriage, it will generally be considered part of the marital estate and subject to equitable distribution, even if only one spouse's name appears on the deed or mortgage.
That does not necessarily mean the equity will be divided exactly 50/50. New Jersey uses equitable distribution, which means marital property is divided based on the applicable legal factors rather than an automatic equal split.
Things can become more complicated when one spouse owned the house before the marriage or received it through an inheritance or qualifying gift.
For example, you may have purchased the home years before meeting your spouse but then used marital income to pay the mortgage throughout a long marriage. Maybe you refinanced it together, added your spouse to the deed, or used marital funds for substantial improvements.
In situations like these, simply looking at the name on the deed may not tell you what portion of the property's value is subject to distribution.
Before you argue about who should keep the house, find out what you are arguing over. At its simplest: Market value − mortgage and other liens = equity
If your house is worth $800,000 and you owe $300,000 on the mortgage, you have approximately $500,000 in gross equity. But that does not necessarily mean each spouse walks away with $250,000.
Separate-property claims, marital debts, credits, the overall distribution of your other assets, and other financial issues can affect the ultimate result.
And don't build a settlement around what Zillow says your house is worth. If the value matters to your divorce, get reliable information. That may mean obtaining a professional appraisal or agreeing on another appropriate method of valuation.
One of the most common solutions is for one spouse to keep the home and buy out the other's interest.
Suppose you determine that your spouse is entitled to $200,000 of the home's equity. You might refinance the mortgage and pay that amount directly, or the buyout could potentially be incorporated into the overall division of your marital property.
The bigger question is whether keeping the house actually makes financial sense. People sometimes become so focused on winning the house that they stop asking whether they can afford it.
After divorce, one household becomes two. The person keeping the house may now be responsible for the mortgage, property taxes, homeowners insurance, utilities, maintenance, repairs, and unexpected expenses on one income. Being able to afford the house while married does not mean you will comfortably afford it after divorce.
This is one of the most important distinctions to understand: Taking someone's name off the deed does not take their name off the mortgage.
If your former spouse signs over ownership but the mortgage remains in both names, the lender may still consider both of you responsible for the loan. If payments are missed, the consequences can affect the spouse who no longer even owns the property.
A settlement involving one spouse keeping the home should clearly address refinancing or other arrangements for the mortgage, including deadlines and what happens if the person keeping the house cannot qualify.
For example, the agreement might require refinancing within a certain period and provide that the house must be listed for sale if refinancing cannot be completed. “Don't worry, I'll refinance later” is not the kind of provision I want my client relying on.
Sometimes selling is the cleanest solution.
Neither spouse may be able to afford the property independently. A buyout may require more cash than either person has available. Or both spouses may need their share of the equity to establish separate homes and move forward.
If the property is sold, the mortgage, applicable liens, commissions, and closing expenses are generally addressed through the sale, and the remaining proceeds can then be distributed according to the parties' agreement or court order.
The settlement should also deal with the practical details. Who chooses the real estate agent? How is the listing price determined? Who lives there while it is being marketed? Who pays the mortgage and repairs? What happens if you receive an offer one spouse wants to accept and the other refuses?
You don't want to discover these problems while a buyer is waiting for an answer.
You do not necessarily need to write your spouse a check to buy out their interest. Sometimes one spouse keeps the house while the other receives more of another marital asset, such as investments, cash, retirement savings, or another piece of property.
That can work well, but be careful about comparing assets based solely on their balances. $200,000 of home equity is not necessarily the same as $200,000 in a 401(k).
One asset may be immediately accessible while another may eventually be taxable when withdrawn. They may also have different risks, expenses, and future growth potential. Look at the entire financial picture, not just whether the numbers appear equal on paper.
There are cases where selling immediately does not make sense.
The spouses might agree that one parent will remain in the home with the children until a child graduates from high school, until refinancing becomes possible, or until another specified event occurs.
A delayed sale can provide stability, particularly for children. It can also keep former spouses financially tied together for years.
If you choose this approach, the agreement needs detail. At minimum, you should know who is responsible for the mortgage, taxes, insurance, ordinary maintenance, and major repairs; whether either spouse receives credits for those payments; how future appreciation or depreciation will be handled; and exactly what triggers the eventual sale.
If you leave those questions unanswered now, there is a good chance you will be arguing about them later.
Not automatically. Keeping children in a familiar home can be an important consideration, particularly when deciding who will temporarily occupy the property during the divorce. But custody of the children and ownership of the house are separate legal issues.
You may remain in the home with the children while the divorce is pending and still ultimately have to sell it. Or you may eventually buy out your spouse and remain there permanently.
The children's stability matters, but it has to be considered alongside the financial realities facing both parents.
If you and your spouse cannot reach an agreement, ultimately a judge may have to decide what happens. Depending on the circumstances, the court may need to determine whether the house should be sold, whether one spouse can buy out the other's interest, how the equity should be distributed, who can occupy the property while the divorce is pending, and how expenses should be handled.
Once you put those decisions in the judge's hands, however, neither spouse controls the outcome. That is why I generally want to know whether we can negotiate a financially sensible solution before asking a court to make the decision for us.
The marital home is one of the easiest assets to make an emotional decision about. I understand why. It may represent stability for your children, years of memories, or the life you thought you were going to have. But keeping the house at any cost is not always a victory.
Before deciding, know the value of the property, your actual equity, the mortgage balance, your potential buyout obligation, and what the home will cost you every month after the divorce. Consider taxes, insurance, maintenance, repairs, and the other assets you may have to give up to keep it.
Then ask yourself a different question. Not “Can I keep my house?” But “Does keeping this house make sense for the life I'll have after my divorce?” That is usually the more important question.
If you are considering divorce and want to understand property division, your finances, custody, and the other decisions you may face before making your next move, my free Divorce Smarter Course explains the New Jersey divorce process in plain English.
Until next time,
Steve