Are you going through a divorce while co-owner of a family home? This particular asset can be the source of significant negotiation challenges, especially when one party really wants to keep that home. What can you do to avoid having to sell the house? Here are four methods to consider.
1. Use Assets for a Buyout
A buyout occurs when one spouse purchases the other's portion of value or equity in the house. The buying spouse can now keep the home without the other. However, most spouses don't have hundreds of thousands of dollars sitting around, so you should use other assets to negotiate the buyout. Giving up a larger portion of retirement accounts, for instance, could provide the funds you need.
2. Don't Overlook Sentiment
You know your spouse the best, and you often know what they value most and why. If you don't have enough upfront funds or assets to complete a buyout, look for something that will provide an emotional payout for them. Are they attached to that old vintage car that they fixed up with your child? Offer to give your share of the vehicle in full but for more than it's worth.
3. Take a Cash-Out Mortgage
Just like you did when you bought the house, you can often get a new mortgage to take full ownership of the family home. But you'll need to borrow more than just the value of the mortgage. instead, look for a cash-out mortgage that provides additional funds you can use for any reason — including buying out your spouse. Just be sure you can handle the increased mortgage on your own.
4. Arrange to Co-Own
Co-ownership of a property isn't for every couple, but it can work out well in some situations. Generally, this is done with some end date in mind, such as when the kids leave for college or after 10 years. You and your spouse draw up an agreement about how to manage the house, when both parties have a say, how funds are contributed and spent, and how the sale will be handled. Some couples even use a special purpose entity like a trust or LLC to avoid conflicts.
Which of these methods could help you keep your family home in the divorce? Today's divorcing couples have a variety of choices, so you should meet with a divorce attorney in your state to assess your options.