I am often asked this question. The answer is not simple. The house is often the largest asset – and the largest debt – of a married couple. It is not just a question of who lives there. Intertwined with it being your home, there is often equity in a jointly-owned home to which each of the spouses may have some entitlement. In addition, many homeowners purchase their home through the use of a mortgage and often have a home equity line of credit, or second mortgage encumbering the house as well. As long as the mortgage or other lien against the home exists, it can seriously affect your monthly expenses, your credit rating and/or your ability to purchase another major item, like a car or another home, or even to rent another home. This can make separation more difficult.

In Maryland, the Courts have limited authority to transfer title to Marital property in the event of a divorce. One of the exceptions to that limitation, however, is jointly-owned real property that is “used as the principal residence of the parties when they lived together”. Maryland Family Law Code Ann. § 8-205(a)(2)(iii). In the event of a divorce, the Court can order that one party purchase the interest of the other party in the joint residence; or order that the property be transferred to one party “if the party to whom the real property is transferred obtains the release of the other party from any lien against the real property[.]” Id. This means that if a party seeks a Court order for the transfer of the jointly-owned residence to him or her, that party must prove that he or she can remove the other party from the mortgage, whether by assumption of the mortgage, refinance, repayment in full or otherwise. Especially if your mortgage was obtained using the income and credit of both parties, that can be a difficult or impossible task.

Parties can reach agreement on the disposition of the family home, without Court involvement, and there are many possibilities. One word of caution is that any agreement about the home must also include agreement about an existing mortgage or other lien. Any agreement with respect to a mortgage or other lien must be approved by your lender or you risk violating the terms of your loan and accelerating the total balance. That means it is not simply a question of transferring title of the house from one party to the other, but also assuming or refinancing the mortgage so as to release the non-residing party from all liability for it, with the approval of your lender. Parties who transfer title without also making a change to the mortgage or lien may be making a big mistake.

Parties might want to agree to keep the home in joint names while the children are in school, selling or refinancing the mortgage after they graduate and leave home. In such a case it is important to discuss the details surrounding that arrangement, such as who has the responsibility to pay carrying costs, utilities, maintenance and repair costs, real estate taxes, lawncare, etc. It also means a discussion of how the tax deductions associated with the home, such as for real estate taxes and mortgage interest, would be allocated between the parties on future tax returns. And if the home is to be sold at a later date, how will the net proceeds be divided at that point, and any capital gains tax be allocated and paid? If one party is responsible for paying all carrying costs for the home for several years, is a 50/50 split at the time of sale fair? Further, if one party lives there and the non-resident party is still on the mortgage, this could hinder that non-resident party from purchasing a new home. How long will that non-resident party agree that their credit is tied up in this home they no longer live in? If the residing party cannot refinance or assume the mortgage at the time of divorce, how long will the parties agree that this party can try to get it done?

When negotiating these issues with your spouse, it would be important to learn about your ability to take on further debt, and the cost of another home in your preferred location, by consulting with a mortgage broker and/or a realtor. Working with an experienced family lawyer would be helpful so you can consider all options available to you with the goal of reaching an agreement with your spouse that you both can live with, and which will benefit your family.

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