When people in California make the decision to divorce, dividing the marital home can be a challenging prospect. Both people may feel a sense of emotional attachment to the property. Even more, the home can be the largest single asset shared by the couple, so each partner may have difficulty raising the required funds to buy out the other. Of course, the value of a buyout is not solely determined by the market value of the home but rather by the equity that the married couple has in the property. The amount of the buyout may be affected by the mortgage remaining on the home, and refinancing the mortgage is another significant issue during property division.
In many cases, the spouse wanting to keep the home will need to refinance the mortgage into his or her own name alone. If this is part of the property division agreement, that spouse may apply for a larger mortgage to cover the buyout of the other spouse. However, this means that the remaining spouse must be approved to borrow that greater sum of money on the basis of his or her income and credit alone. Spousal support payments may be taken into account by some lenders when determining mortgage eligibility.
Other people may decide to divide other marital assets in a way that essentially trades home equity for a larger share of retirement funds, investment accounts or other high-value assets. This may be more common for divorcing couples with larger assets overall, including people with multiple real estate investments.
Divorce can be challenging for any couple, especially when major financial decisions are involved. The effects can linger long after other personal matters are resolved. A family law attorney may work with a divorcing spouse to seek a fair settlement on property division, spousal support and other key matters.