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There are many issues in a divorce but one that exists in almost every case is what to do with the marital home.  One spouse may want to keep the home, both spouses may want to keep the home or neither may want the home.  The issue of the marital home becomes more complicated when the parties have been separated for some time and one spouse has been living in the home and paying all the bills associated with the home including the mortgage.  This blog is written to broadly address how that issue is handled by the family law courts here in Michigan.  If you have questions regarding your specific situation, please do not hesitate to contact us by clicking on this link or calling (248) 608-4123.

How Is Equity In The Marital Home Determined?

Typically the equity in the marital home is determined either by subtracting the mortgage balance from the appraised value to arrive at an estimated value of the equity or by selling the home - the proceeds from the sale then represent the equity in the home.  Typically the equity or proceeds are split equally by the spouses.  If one spouse wants to keep the home, then that spouse will most likely have to "buy-out" the other spouse's equity.  This is most often done through a refinance or home equity line of credit to pull money out of the home or by giving the other spouse more of other assets in an amount equal to the other spouse's share of the equity.  If the underlying mortgage is in both spouses' names, then the spouse that keeps the home most likely have to refinance to remove the other spouse's name from that liability.  If both spouses want to keep the home, often the spouses will essentially engage in a bidding war with the spouse wiling to pay the most for the home getting the home and buying-out the other spouse at an inflated value.

What Happens When One Spouse Has Moved Out And Not Contributed To Paying The Mortgage Or Other Bills?

There are two ways the court may handle this and to a certain extent it really depends on which judge is assigned to your case.  Generally, you are considered married until you are actually divorced by the court.  This means that in the eyes of the court any increase in value of property or property purchased by either spouse until they are actually divorced is considered joint marital property to be divided roughly equally between the parties.  Some judges will strictly and blindly follow this rule regardless of whether one spouse stopped living at the home and paying the bills associated with the home.  Other judges will be willing to consider whether the other spouse contributed directly or indirectly to the acquisition or increase in the value of property when determining the equity to be divided. 

To explain what this difference in philosophy means in practical terms it is easiest to use an example.  Say Frank and Terry were married ten years ago and purchase a marital home together.  Six years later Terry moved out of the marital home and stopped paying any bills associated with the home while Frank remained in the home and paid all of the bills associated with the home.  Frank has now filed for divorce and Terry's equity must be determined.  If the judge is one that strictly follows the basic rule that the parties are married until they are divorced, the equity will be determined by using an appraised value and mortgage balance as close as possible to the actual date of the divorce regardless of any contribution by Terry.  On the other hand, if the judge is one that will consider whether there was any contribution (directly or indirectly) by Terry to the increase in the value of the home, the equity will probably be determined by using a historic appraisal and mortgage balance dating back to the date that Terry left the home and stopped contributing in any way to the increase in the equity in the home.

Divorce can be a very complicated and confusing thing to go through and having good counsel is essential.  If you are facing the prospect of a divorce, please do not hesitate to contact us to schedule a consultation by clicking on this link or calling (248) 608-4123.