What Will Happen to a Newly Purchased Property in Divorce?
Many couples going through a divorce own a home, and figuring out how to divide that or what to do with it can present challenges. But what if you just purchased that home or property?
The answer depends. If only one partner owns the home, it is his or hers to manage. However, most couples put both names on the mortgage. In that case, if you and your partner bought a home together and then decided a few months later to divorce, you will divide the property as you would a home you had for five years. Because you are still paying a mortgage, you divide it as debt however agreed. Couples often choose to sell the home. Of course, in a situation where you own the home longer, you may have equity in the home that can be divided. In a new home, you are more likely selling it to cover the debt.
If you and your partner just bought the house, you are probably “upside down,” meaning you owe more on it than the house is worth. In that case, you may not be able to afford to sell it. Here are your options:
- Short sale – Your mortgage lender may agree to accept less than the full value of the property and cancel the debt. However, this can have tax implications and affect your credit score.
- Cohabitation – If you and your partner can continue living together, you might do so until the market improves. Some couples who have children agree to a nesting agreement in which they share the house.
- Rent the house – If you can rent the home out to others, you and your partner can delay a sale and build up equity. However, you and your partner will need to work together to manage it, which may not be possible in some divorce situations.
One partner can take over the home if he or she chooses, but he or she will need to refinance under his name. If you and your ex choose this route, you may hear about a quitclaim deed. This is a way to legally transfer your interest in the property while keeping your name on the mortgage. Some partners request this if they cannot refinance on their own. However, agreeing to this is risky for the partner who forfeits; he or she will be held accountable for any missed payments and his/her credit score affected. Signing this type of deed means you forfeit your right to sell the home and profit from it.
Purchasing Property During Divorce
You may need to buy a car or house while your divorce process is ongoing. Speak to your divorce lawyer about these purchases. If a down payment came from money considered marital assets, a court might later consider that a pre-distribution of those assets and award your ex more in exchange.
If you have more questions about dividing property during divorce, schedule a consultation with one of our divorce professionals or attend our monthly workshop to ask one of our family attorneys directly.