Home Equity Lines, Mortgages, and Divorce
Distinguishing and separating financial obligations are one of the most difficult parts of divorce. The longer a couple is married, the harder it is to figure out when and how many items of property were acquired or which funds were used to maintain them. Family homes and real estate in general is particularly tricky to assess, especially if one spouse brought property into the marriage and the other spouse derived a benefit from it. Further, the finances involved in obtaining a loan to buy a home and/or home equity line of credit, often established to address additional financial concerns, greatly complicates how to handle the division of marital property. In addition to the division of the asset itself, any financial debt associated with the property is usually also allocated between the spouses. However, when a spouse is authorized to use the equity line of credit, but is not listed on the mortgage, the question becomes how to address this gap in liability, especially if the intent is to keep the home. A discussion of how courts typically address the allocation of home equity credit line debt, and general options when a home must be divided in divorce, will follow below.
Home Equity Line of Credit
As mentioned above, both assets and liabilities attributable to the marriage are divided in divorce, and anything assumed or purchased during the course of the marriage falls into this category. Further, pre-marital property that benefited from marital contributions can be subject to partial division, a common issue with real estate. When it comes to home equity lines of credit specifically, how the money was used, especially after a couple separates, will often control how courts are willing to divide this obligation. For instance, if the line of credit was used to pay for joint financial obligations or other family debt, it will likely be the responsibility of both spouses. If, on the other hand, the money was used by one spouse for his/her own benefit, such as supporting an affair or extravagant spending, a judge will likely put the burden on the self-serving spouse. In addition, to ward off the possibility of financial abuse after separation, a request may be made to the lender to freeze or cancel the account and disclaim any further obligation for future debt. Further, if one spouse agrees to assume the debt in exchange for obtaining full and exclusive rights to the home, he/she should be required to refinance the property within a reasonable time, so the other spouse is fully released from further obligations.
Dividing Marital Homes Generally
Generally, divorcing couples have one of two options to deal with the family home: sell or keep it. Selling is the most straightforward and simple method of handling the division of this asset. Precisely how the proceeds of a sale would be divided would depend on a number of factors, including:
- whether both spouses own the home;
- which spouse contributed more to the mortgage and repairs; and
- the total amount of marital property in relation to each party’s additional financial resources and earning capacity.
However, if keeping the home is the goal, it is first necessary to determine if the income of one spouse is enough to cover the mortgage and maintenance, as well as if he/she has a sufficient credit score to qualify for refinancing or assumption of the loan. Making the decision to sell or keep the home is commonly tied to a couple’s financial health generally, and should be discussed with financial and legal experts to determine which route makes the most sense.
Speak with a Tampa Florida Divorce Attorney
The intertwined obligations of a mortgage and home equity line of credit is not an easy issue to resolve. If you have concerns about this type of situation in divorce, contact the experienced and committed attorneys at All Family Law Group, P.A. We understand the financial implications of these decisions, and will help you to achieve the best possible outcome. Contact the Tampa divorce attorneys and family lawyers at All Family Law Group, P.A. in Tampa Bay for a consultation at no charge. They can be reached at 813-672-1900.
by Lynette Silon-Laguna Google+