What Happens to Your Present Home?

Summary: The marital residence usually is sold or refinanced in order to divide the equity. If one of you keeps the home, then the mortgage usually must be refinanced in order to remove the other from the loan obligation. Make sure that the one who leaves the residence does not remain liable on the mortgage..

The Equity in a Marital Home Must be Divided, Usually by Sale or Refinance.

The division of property in a Colorado divorce includes the family home. In other words, if the home is marital property, then generally half of the equity belongs to each spouse (but not always.)

If one of the spouses keeps the home, then:

1. The other spouse must be paid for his or her portion of the equity (or that value is offset with other marital property such as money);

2. The other spouse's name must be removed from the title by deed; and

3. The other spouse's name must be removed from the existing mortgage loan. Otherwise, that spouse remains liable for the payment of the existing mortgage, even though he or she no longer owns any portion of the home. In addition to potential credit report problems if the mortgage payments are late, that spouse probably cannot qualify to buy his or her own property (unless he or she can qualify for both mortgages at the same time.)

As a result, generally the home must be sold or refinanced.

The purpose of the refinance is to: (1) release the other spouse from the existing mortgage loan; and (2) take some cash out to pay the other spouse for half as part of the divorce settlement.

The Mediated Separation Agreement Must Address the Home.

The mediated separation agreement) should provide that the spouse who keeps the home has a certain number of days (such as 60 days) to refinance the home. If the home cannot be refinanced within that time period, then the agreement should require that it be sold and indicate how it is to be sold. That is what a Judge is likely to order.

If neither spouse can keep the home, then it must be sold and the proceeds split in accordance with the separation agreement.