Couples in California who decide to get a divorce frequently have a home with both of their names on the title and home loan. A divorce requires both of you to decide how to resolve this jointly shared asset and debt. Your individual financial circumstances influence the direction that you take to divide your debt obligation and asset equity.
Sell the house
Many divorcing couples choose to sell their residence. The proceeds from the sale should payoff the mortgage. If any money is left over, you and your ex-spouse can divide the proceeds along with your other financial holdings.
Keep the house as a shared investment property
In some situations, people decide to keep the jointly held property and rent it out. The rental income should cover the mortgage and maintenance. You retain the option to sell it and split the proceeds at any point in the future.
This option includes some risk if both of you are named on the home loan. If one person misses mortgage payments, then the credit scores of both owners suffer.
Refinance the home in one person’s name
If a lender is willing to approve you for a home loan on your single income, you could refinance the original mortgage as your sole debt. This transaction would require that your ex-spouse relinquish ownership by signing a quit-claim deed.
However, refinancing the remaining debt as your sole responsibility does not settle the equity in the home. Any value in the property above your debt represents equity, and your ex-spouse has a right to half of that value. You would have to offer other funds or assets in exchange for retaining ownership of the home’s equity or obtain a cash-out refinance that lends you the money to pay out the equity share.