There are multiple factors affecting the determination of which spouse will receive ownership and possession of the marital home in a Colorado divorce case. The determination is dependent on the unique facts of each situation. Below we discuss some factors and considerations in awards of the marital home.
An Award of Ownership is Usually Not an Award of All Value
First, “who gets to keep the house?” is really two questions in one. Who receives ownership post-divorce does not determine who receives the value (equity) of the house. A party can receive ownership, but be required to pay value (equity) out to the other spouse. If not agreed upon by the parties, the Judge is tasked with determining an equitable division of all marital assets and debts. How the value of a house is divided between spouses can depend on how other assets are divided. Assuming all assets are divided roughly equally, a house that has no separate or pre-marital claims by one spouse will have its value divided equally.
How is a home’s equity value divided in divorce?
The division of a home’s value can be accomplished a couple ways. The simplest is sale of the home and division of the equity from the sale. If a spouse wishes to stay in the home, they may be allowed a time period to attempt a cash-out refinance of the house solely into their name (assuming both spouses are bound by the mortgage) and then make a payment from that to the other spouse. If both spouses wish sole ownership of the house, the Judge would have to make the decision of which spouse gets ownership. This determination will often hinge on either who can practically afford to stay in the house or whether one parent will be primary custodian of the children.
The naming of a spouse on a deed to the property usually does not matter
It is important to understand that the titling of real estate on a deed is usually irrelevant to who is awarded ownership and possession of a house acquired during marriage. If a house is purchased during marriage and titled in one spouse’s name, that titling does not affect who receives the home or equity from it. Generally, all assets acquired during marriage are considered marital property subject to division in divorce, regardless of whose name the asset is titled in. Therefore, the fact that only one spouse is named on a deed usually plays no role in determination of ultimate ownership or division of equity in the marital home. However, this can play a role if a spouse owns a home prior to marriage.
What if a spouse owns a home prior to marriage?
Division of value can vary when a spouse owns a property prior to marriage. Assets owned prior to marriage are generally the separate property of the spouse who originally owned the property. However, if the property is later jointly titled into the names of both spouses it is often considered a marital asset gifted to the marriage. Even when a home is owned solely in the name of one spouse who purchased the property prior to marriage, the increase in equity in the home during the marriage is considered marital property subject to division. In the hot Colorado real estate market, this means that most houses have equity value to be divided in divorce even in short term marriage. Read more about protecting separate assets with a Marital Agreement or Pre-Martial Agreement.
Can both spouses afford to refinance the house solely in their own name?
Often the question of who receives ownership of a house hinges on the practical matter of which spouse can afford the house post-divorce. If only one spouse can practically afford the mortgage for the property after making other payouts ordered in the divorce, then that spouse is going to be awarded the house. The Court will not order an impossibility. It is often impossible for a spouse with lower income to refinance a house solely in their name. This is especially difficult when a payment of equity is required to the other spouse. This means that a spouse would have to obtain a cash-out refinance that refinances the entire mortgage solely into their name, plus an amount to compensate the other spouse for whatever share he/she is awarded from the home’s equity.
A common resolution of the issue by judges in Colorado involves a determination at Permanent Orders hearing that one spouse will be awarded ownership of the house provided that they refinance the house in a certain time frame and make a payment of the equity to the other spouse. Common time frames provided are 60-90 days to refinance. If the spouse fails to obtain a refinance in that time frame, the home must be sold.
This resolution also accomplishes part of the goal of untangling the parties’ finances by removing the other spouse’s name from the existing mortgage, if they were jointly obligated on the mortgage. Most mortgage lenders will not voluntarily remove an obligor from a mortgage. The mortgage must be either refinanced into one spouse’s name or sold.
Will one spouse be primary custodian of minor children?
Another strong consideration in determining which spouse should receive ownership of the house is whether a spouse wishing to stay in the residence will be the children’s primary caregiver. There is a statutory requirement that the Judge consider the desirability of awarding the family home to the spouse with whom the children reside the majority of the time. C.R.S. § 14-10-113(1)(c).
These are some of the main factors the affect the determination of who receives possession of a house. This is only scratching the surface of the determination of how value is divided in a home, which is largely dependent upon the overall division of assets and debts.
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No Legal Advice Intended: This information is not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You should contact an attorney for advice on specific legal problems.