Fair doesn’t always mean equal. When a divorce happens in New Jersey, the equitable distribution rules mean that a couple’s assets and debts are supposed to be divided in a way that’s fair, which may or may not mean 50/50.
Couples can usually decide how to divide a lot of their material possessions fairly easily through a bit of negotiation. Maybe one spouse will take all the crystal and flatware, while another wants the cookware and dishes. Those kinds of things are (usually) fairly easy to split.
But, what about the family home? It’s not as easy to divide as some dishes, but here are three popular approaches:
1. One spouse buys out the other’s equity.
Maybe one of you has a stronger attachment to the house than the other. If so, you can arrange to have the house independently appraised to see what it would sell for at fair market value to determine how much equity you have. Then, one of you simply buys out the other’s share.
Be wary, however: Simply signing over the deed to the property in exchange for half its equity won’t relieve you of any obligation to the mortgage holder. If the house has a mortgage, the spouse who wants to retain it should refinance it into their own name.
2. You sell the house and split the proceeds.
Realistically, most divorcing couples aren’t in a position where one can afford to buy out their other’s equity and refinance. Maybe they simply don’t have any way to get the cash, or maybe their credit isn’t good enough to refinance.
In those situations, selling the home and splitting the profits can be the only real option. This is also a good route to take when both spouses want the cash to start over somewhere.
3. You keep the house (for now).
This is a little trickier, but a lot of couples do it. Sometimes, it’s because they just bought the house and they don’t want to lose money by selling too soon. Other times, they have children they don’t want to uproot from their schools or friend groups.
You need to pay particular attention to the logistics of this approach, if that’s your plan. The divorce agreement should be explicit about who pays for what maintenance or repairs, what issues can force the house to be sold, when the agreement will expire and more.
Protecting your interests in a divorce can be hard, so make sure you have experienced legal guidance.