Going through a divorce is rarely an easy process. Most divorces are challenging to get through at the very least. Not only can things get emotionally messy, but there are often a lot of tricky legal matters involved as well. One decision that’s often quite contentious is what to do with the house. If you are getting divorced and own a home with your spouse, then the following are some of the options that you have when it comes to selling the house:
- Divide the profits of the house equally
If neither you nor your spouse wants to keep the house, or if neither of you can afford to keep it, then simply selling it and splitting the profit might be the best decision. However, it’s important that you understand that your divorce can affect how much money you end up pocketing. If you’ve lived in your house for a long time, then your profits may be affected by the capital gains tax.
Couples can exclude upwards of $500,000 in capital gains. If you sell your house for above that amount, any profit over that sum will be taxed. If the divorce is finalized before you sell the house, then you could end up losing more money towards capital gains tax due to the fact that unmarried individuals can only exclude up to $250,000 in capital gains.
- Buy out your spouse
If you have the money, then you can buy out your spouse if you want to stay in the house and retain ownership. A buyout is different than a sale, which can make the process difficult, especially if you and your spouse are not on good terms. You should get a professional appraisal of the house and consider the money you have already paid on the home mortgage when determining a buyout figure that you and your spouse can agree on.
- Let your spouse buy you out
If you have no desire to remain in your house, but your spouse wants to stay, then you can let your spouse by you out. You may choose this option if you cannot afford to buy out your spouse or pay the mortgage, but your spouse can (and wants to). However, make sure that your name is removed from the mortgage.
- Delay the buyout
If you want to stay in the house and your spouse agrees to let you have it, but you can’t afford to buy your spouse out, then you can delay the buyout. When you delay the buyout, you get to remain the house while your spouse moves out. You will then continue paying the mortgage on your own until you can afford to either buy out your spouse or sell the house to divide the profits.
This tends to be a riskier option for the person who is moving out. There are several reasons for this. If your spouse stays in the house and delays the buyout, your name will remain on the mortgage, which means that if they fail to make payments, it could end up hurting your credit. There could also be emotional challenges down the line as well. For example, there may eventually be arguments about the way the house is maintained, or over another person moving into the house. You’ll have to consider these possibilities. If you do decide to delay the buyout, no matter who is staying in the house, you should sit down together with your lawyers and hash out an agreement that goes over these potential challenges.
These are the main options that you and your spouse will have if you are going through a divorce. However, keep in mind that in some cases, both spouses may want to keep the house because they are both financially capable of doing so. If this is the case for you, then your attorneys will need to get involved in order to determine who has the right to keep the house. If you have any questions about a New Jersey divorce and what to do with your home, call the Law Offices of Peter Van Aulen at (201) 845-7400 for a free 30 minute in office consultation.