What to do with the marital home before and after divorce

State law determines how couples are supposed to handle property division in a divorce. Since Texas is a community property state, a house and other assets acquired during the marriage are generally, in the absence of an agreement between the parties, split equally by the court during the property division determination. Selling the house and taking half the proceeds would be the simplest solution, but usually one person wants to continue living there. In that situation, both parties need to take steps to protect themselves financially. Getting a divorce does not automatically change the status of jointly owned property in the eyes of creditors.

When a divorce goes through, a mortgage is unaffected. If both parties' names are on the loan, then they are both on the hook for making payments, even if one moved out. One way to fix this is to refinance and put the new loan in the name of the person living in the house. This should be done before the divorce petition is filed.

If someone wants to move out and buy a new home, it could be difficult if his or her name is still on the mortgage for their former residence because of the debt-to-income ratio. Refinancing opens the door to getting a new mortgage in most cases. However, if the couple is still married, the new home would be considered community property. This can be avoided if the party who is staying in the old house signs a quitclaim deed relinquishing any right to the new home.

Even with an amicable divorce, not every party gets a settlement they want. An attorney could assist a client who has decided what assets are most important to their financial future in negotiating an appropriate property division agreement.

Source: Credit.com, "How to Divide Your House in a Divorce", Scott Sheldon, July 09, 2014

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