Residents in California who own their primary residence and are getting divorced will have to make the decision about what to do with their home once their marriage is over. For many people, a home represents their single largest asset so this decision has the potential to play a big part in the ultimate divorce settlement. From an emotional perspective, people often have deep ties to their family homes which may lead them to want to try and keep their home.
As explained by The Mortgage Reports, if one spouse wants to keep the house after the divorce is finalized, it is recommended that they seek a new loan in their name only. This is truly the only way to absolve the other person of financial responsibility for the property. Even if a divorce decree assigns responsibility to one spouse, a lender may seek payment from both spouses if both names remain on the loan.
The ability to get a new loan may be impacted by a dip in both income and credit as this often happens when getting divorced. If the spouse who wants to keep the home needs to pay the other person their share, some equity in the home may also be essential so that they can take money out to pay their former spouse.
Bankrate notes that a person’s post-divorce income may drop even more once the new tax code goes into effect in 2019. This is because of changes made to how alimony is taxed which may well result in fewer people agreeing to pay alimony. Therefore, the would-be receiving party may end up with even less income than under the current tax law.