Marital Homes, Mortgages, and New Jersey Divorces

In the case of most New Jersey residents seeking divorce, the family home or marital residence is the most significant asset in those proceedings. With this in mind, there are a number of facts and factors to bear in mind when it comes to marital homes, mortgages, and New Jersey divorces – which we resent for your consideration in this article.

Understanding Equitable Distribution in New Jersey

When it comes to New Jersey divorces, what is known as equitable distribution of assets govern. Pursuant to this standard, property acquired during marriage is divided fairly and equitably. This does not necessarily mean equally. A family court judge considers a variety of factors that can include such factors as:

• Length of marriage
• Income levels
• Contributions to the property
• Each spouse’s future financial prospects
• Whether one parent needs the home to maintain stability for the children

Equity in a home is not simply split down the middle during a divorce. Rather, the objective is fairness based on the couple’s unique circumstances as considered by the court in a New Jersey marriage dissolution proceeding.

Determining a Home’s Fair Market Value

Before any meaningful conversation about the marital residence can occur during Garden State divorce proceedings, you must know what the home is worth. In this regard, retaining the services of an experienced professional appraisal is the most common method to ascertain value. With that said, there are instances in which divorcing spouses sometimes agree on a real estate agent’s comparative market analysis.

Keep in mind that because home values fluctuate, using accurate and current valuation is essential. In a case in which spouses cannot agree on a residential valuation, the court may rely on expert testimony. In the grand scheme of things, the valuation determines how much equity exists in the family home or marital residence after subtracting the outstanding mortgage balance.

Calculating and Dividing Equity

Once the fair market value of a marital residence is established, the couple must decide how to distribute that equity. Because New Jersey is an equitable division of assets and debts jurisdiction, distribution could result in one spouse receiving a larger share if, for example, they contributed more to the down payment or have primary parenting responsibilities. Equity in the residence can be divided in a number of different ways which we now discuss.

Refinancing to Remove One Spouse from the Mortgage

If one spouse intends to remain in the home, refinancing is typically required to remove the other spouse’s name from the mortgage. The bottom line is that simply signing a quitclaim deed to remove a name from the title does not remove mortgage responsibility. The party who intends to keep the marital residence must qualify independently for a new home mortgage loan in most instances.

Selling the Family Home

In New Jersey divorces, selling the marital residence typically is the “cleanest” course to take to divide its value between the parties. Proceeds are distributed pursuant to the divorce settlement. In this scenario, both parties end up free of joint mortgage obligations

Buy-Out Options When One Spouse Keeps the Home

When one party to a New Jersey divorce wishes to remain and refinancing is financially possible, the next challenge is buying out the other spouse’s share of the equity. This can be accomplished in a number of ways that include:

• Paying the spouse their equity share at refinance
• Trading other assets of comparable value (e.g., retirement funds)
• Structuring a payment plan over time

Risks of Remaining Co-Borrowers After Divorce

Finally, some spouses agree to maintain joint ownership of the marital residence during and following New Jersey divorces. As a consequence, they maintain joint mortgage obligations. This especially is the situation when children are involved in the termination of a marriage.

There are risks associated with this course of dealing with the family home. If the spouse responsible for paying the mortgage falls behind, both credit scores suffer, and both may face foreclosure exposure. Moreover, the spouse who moves out may find it difficult to qualify for new housing loans because of the existing mortgage. With all of this in mind, any agreement to stay co-borrowers should include strict payment protections and consequences for default that are spelled out in detail in a divorce settlement agreement or order of the court. If you have any questions call (201) 845-7400 for a free consultation.