During property division in divorce proceedings, the marital home is one of the assets that couples are required to divide, as dictated by state law. In Texas, being a community property state, the court usually distributes all assets equally between the parties, including the marital home, if there is no agreement in place. While selling the house and splitting the proceeds may seem like an easy solution, it’s not uncommon for one party to wish to continue living in it. In such situations, both parties should take steps to protect their financial interests, as the status of jointly owned property remains unchanged for creditors after a divorce.

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

Related Posts: Choosing where to live after a divorce, Selling the family home when marriage ends in Texas, How to divide a 401(k), Keeping a trust protected in case of divorce