Dear Mr. Gisriel:
My husband and I jointly own a house and have discussed divorce. What are our options in dealing with the house if we decide to split?
Name withheld by request
Divorce is rarely easy and often means lots of difficult decisions. One of the most important is what to do about your house.
Most divorcing homeowners face three basic housing options: 1. Sell the house and split the proceeds. Ask a real estate agent or mortgage broker to analyze your home's market value, then estimate -- after selling expenses -- how much the sale will net.
Be careful not to assume there will be a 50-50 split of the sale proceeds. Your share may depend on your divorce settlement, on the source of the original down-payment money or the property laws of your state.
Most states, including Maryland, follow equitable distribution principles which may favor a particular spouse, but some are community property or common law states that often produce a 50-50 split.
2. Buy out your spouse's share of the home. Since 1982, lenders have not been able to "call the loan" when a property is transferred from one spouse to the other due to divorce. The lender, however, is not required to relieve the departing spouse of the obligations of the original mortgage note, even though the spouse no longer owns part of the house.
Often the key to this option is refinancing. Your own personal income is an important consideration, and a mortgage broker can help determine whether you can qualify. Remember, if you used two incomes to qualify for the old loan, refinancing on your own can be a stretch.
If you can afford to keep up the mortgage payments, upkeep costs and also buy out your spouse, this may work. When children are involved, some judges rule the custodial parent must be allowed to buy out the other parent.
If you are the spouse who is bought out, you have an opportunity to start over in a new place, possibly with cash in hand. But if the old loan is not refinanced, the lender may continue to insist that both co-signers are still liable for the mortgage. This liability may make it difficult for you to qualify for a new mortgage when you try to buy another home.
3. Retain joint ownership of the house for now, even though only one partner occupies it. This option leaves things pretty much alone for the present, and can work if both co-owners can continue to cooperate after the divorce -- which poses its own challenges. If the house is sold later, or one spouse eventually buys out the other, remember the tax consequences could change between the date of the divorce and the time of the later sale.
There are many real estate professionals, both real estate agents and mortgage brokers, qualified and willing to help you make the right housing decision. Please call one of them for advice.
Michael Gisriel is senior vice president of Fountainhead Title Group of Columbia and host of the weekly radio show "All About Real Estate" on WCBM from noon to 1 p.m. on Sundays.
Send real estate questions to Michael Gisriel, c/o Mailbag, Real Estate Section, 501 N. Calvert St., Baltimore 21278.
You can also leave questions on Sundial, The Baltimore Sun's telephone information service, by calling (410) 783-1800 and entering the code 6170 after you hear the greeting. For more local Sundial numbers, see the notice on Page 2A.
Pub Date: 12/01/96