Divorce can be a challenging and emotional process, especially when it involves significant assets like the marital home. In Florida, the division of property, including the family home, follows the principle of equitable distribution. This means that the court aims to divide marital assets fairly, though not always equally. Understanding how the marital home is handled during a divorce is crucial, especially if one spouse plans to keep the home.
In this blog, we’ll cover the key factors involved in determining how the marital home is divided during a divorce and what each spouse’s equitable interest in the home means. This blog will focus on a marital home titled in both spouses’ names. Homes titled in just one spouse’s name is a subject for another blog.
What Happens When One Spouse Retains the Marital Home?
In some divorces, both parties agree—or the court orders—that one spouse can keep the marital home. When this happens, the spouse who remains in the home may need to “buy out” the other spouse’s share of the property. This buy-out involves compensating the other spouse for their equitable interest in the home.
What is Equitable Interest?
Equitable interest is essentially the share of the home’s value that each spouse is entitled to. To calculate this, you need to determine the fair market value of the home. This is often done through a comparable market analysis or an official appraisal. From that value, subtract the remaining mortgage balance and any other outstanding liens. The resulting number is divided equally between the spouses, giving each their share of the home’s value.
For example, if the home’s fair market value is $500,000, and there is a $200,000 mortgage, the equitable interest would be calculated as follows:
- $500,000 (fair market value) – $200,000 (mortgage) = $300,000
- $300,000 ÷ 2 = $150,000
In this case, the spouse retaining the home would need to pay $150,000 to the other spouse as part of the buy-out.
Refinancing and the Buy-Out Process
In many cases, the spouse who keeps the marital home will refinance the mortgage. Refinancing serves two purposes:
- To remove the other spouse from the mortgage: Divorce is not just about ending the marriage legally; it’s also about separating financially. By refinancing, the spouse remaining in the home ensures that the other spouse is no longer financially tied to the property.
- To pay the other spouse their share of the home’s equity: The refinancing process often includes taking out additional funds to cover the buy-out amount, allowing the spouse retaining the home to pay off the other spouse’s equitable interest.
What Happens When the Value of the Marital Home Changes?
If a divorce case has been ongoing for a long period, the value of the marital home may change—sometimes significantly. In Florida’s current inflationary market, home values can increase while the divorce is pending. This creates a dispute between the spouses regarding when the home should be valued.
- For the spouse keeping the home: They typically want the home’s value to be determined as of the date the divorce petition was filed. This prevents the other spouse from benefiting from any appreciation that occurred after the filing.
- For the spouse not keeping the home: They generally want the home to be valued closer to the trial date, which could mean a larger equitable interest for them due to an increase in market value.
How Courts Decide the Date of Valuation
Florida law under Statute section 61.075(7) gives courts the authority to decide the date for determining the value of marital assets. Usually, the court uses the date the divorce petition was filed to establish the value of assets, but the court has the discretion to choose a different date if it’s deemed more equitable. In some cases, the court may even use different valuation dates for different assets.
Closing Costs and Equitable Interest
One potential point of contention during a divorce is the issue of closing costs. Sometimes, the spouse keeping the home may attempt to deduct 8-10% of the home’s value to account for potential closing costs, even if the home isn’t being sold. This tactic reduces the amount they owe the other spouse in the buy-out.
However, if the home isn’t being sold, there’s no reason to agree to this deduction. The spouse not keeping the home should carefully scrutinize this claim to avoid an unnecessary reduction in their equitable interest.
Final Thoughts on Divorce and the Marital Home
Handling the marital home during a divorce can be complex, and each spouse must fully understand their rights and responsibilities. Whether you are the spouse planning to keep the home or the one expecting a buy-out, consulting with an experienced Florida family law attorney is essential. They can help you navigate the nuances of property division and ensure that you receive your fair share of the marital assets.
