Cincinnati Family Law & Divorce Blog: Who Has The Right to Remain in the Marital Home?
In nearly all divorce cases, the question of what to do with the marital home will arise at some point. In some cases it is easy, neither party wants to stay and the home is sold, or only one party wants to stay and that person keeps the residence. But what about the cases where both parties want to stay in the marital home? How does the court decide? There are several factors that may come into consideration.
Can you refinance? Often times, the mortgage on the marital home is in both parties’ names. This means that the party who wishes to stay in the home will typically need to prove that he or she has the present ability to refinance the loan into his or her own name. Refinances are usually required for two primary reasons; (1) the court favors financial disentanglement of parties to divorce cases, and (2) it is unfair to the party who is not remaining in the home to stay obligated on the mortgage. The party in the home could stop paying the mortgage, resulting in a negative credit impact to the party who left the home or, more commonly, the person who left the home will not be able to qualify for a new home loan of their own because the old mortgage is still considered his or her debt by lending institutions.
Can you afford to “buy out” the other party? When there is marital equity in the home, the party who wishes to stay will have to find the funds to pay the other party for his or her share. This issue does not arise when a house is sold because the parties can simply split any profits. The funds to buy out the other party can come from a variety of sources. In many cases, so long as the remaining party has good credit and there is significant equity in the home, the funds can come from the refinance of the mortgage. Other times, the parties have cash reserves that can be allocated so that the other party is compensated. Some parties have a significant amount of debt, and so long as the remaining party can still qualify to refinance, that party can take on more debt to balance out the ledger. It is also possible to use retirement funds to equalize equity in a home, however parties should be careful about this because retirement funds are typically considered less valuable than liquid assets due to the taxes and penalties often associated with withdrawals. In some cases, the court may be willing to allow for a party to delay paying his or her spouse the equity in the home if it serves the best interest of the children and other opportunities for payment do not exist.
Do you have the children more of the time? Another factor the court will look at, assuming both parties can afford to stay in the home and to finance the home in their own name, is which party will have the children more of the time. Courts will typically do whatever is possible to ensure consistency for children through a divorce process to minimize the negative impact on them. For this reason, the court may seek to keep the children in the comfortable environment they are used by awarding the home to the party who has the children more often.