Divorce With a Shared Residence
Forget those rumors you've heard about one spouse "getting the house" in a NJ divorce. It rarely works that way, with one being awarded the home free and clear and the other walking away empty-handed. The mortgage must be addressed and the equity in the property must be divided.
Whether you and your spouse can negotiate a settlement agreement so your NJ divorce is uncontested, or you're headed to trial so the court can decide the terms of your divorce, your first order of business is to determine the value of your home. The court will most likely want an appraisal performed by a licensed professional. But if your New Jersey divorce is uncontested, you might think to just tag the property with a value based on what you think it's worth.
Stop. Take a deep breath. Think again. The problem with this approach is that your estimate may be way off. If you decide the house is worth $300,000 and structure property division based on this number, the spouse who doesn't keep the property is going to feel understandably cheated if the other turns around and sells it a short time later for $350,000.
He probably lost $25,000, half the $50,000 difference he would have been entitled to. By the same token, if you keep the house and try to sell it, only to realize that the highest offer you receive is $250,000, you're going to feel cheated. Consider having the home appraised so you have a firm number to deal with. The cost is a good investment for some peace of mind.
Alternatively, you can ask a Realtor for a comparative market analysis or "comp." Keep in mind, however, that she wants you to list the house with her. She may go high in an attempt to convince you that you'll receive a windfall if you sell. And yes, there are websites out there that will estimate your home's value when you enter information about the property; but you probably don't want to base this important part of your financial future on a number produced by a calculator that has never laid eyes on your property.
After you've determined how much the house is worth, it's time to deal with the mortgage. In the case of a $300,000 home with an outstanding $150,000 loan against it, that loan must be addressed. If you're keeping the property, you must buy out your spouse's share of $150,000 in equity.
Assuming a 50-50 split of equity, this is most commonly accomplished by refinancing the home for $225,000. The first $150,000 pays off your initial mortgage, relieving your spouse of any obligation for the loan. The additional $75,000 goes to him for his share of the equity. Make sure you can qualify for a $225,000 mortgage based on your income alone, and don't take the lender's word for it that you can. Your lender's decision is based on whether it believes you can make the monthly mortgage payments, not necessarily whether you can make them and also comfortably fund property taxes, insurance, utilities and maintenance. Too many spouses get in over their heads at the time of the divorce, determined to have the home, only to find themselves on the brink of bankruptcy a year or two later.
A buyout isn't your only option. You can agree to sell the property and split the proceeds, or even structure a deferred sale if you have kids you'd rather not uproot immediately after the trauma of the divorce. The latter is a complicated undertaking that will most likely require the assistance and advice of an experienced attorney. If you have any questions concerning the marital home and a NJ divorce, call Peter Van Aulen at 201-845-7400 for a initial consultation.