What to Do About the Mortgage When Getting a Divorce in California

For many families, their house is the most valuable asset, so the question of what happens to the house is extremely important.  The answer can depend on many factors, so this article will give an overview of some of the possibilities and considerations.  If you’d like to understand how the law will impact your specific circumstances, contact  us at the Law Office of David W. Knecht for a consultation.  We have extensive experience in family law and can help you understand how the factors discussed in this article will apply to you, your property and your family. 

  • Determine whether the home is separate or community property.
  • Home purchased prior to marriage, generally separate.  If the home was purchased prior to the marriage by one spouse and no community assets were used to make payments on the home, then it would typically be separate property. This is a general rule and there may be exceptions which are beyond the scope of this article.   
  • Home purchased during marriage, generally community.  If the home was purchased during the marriage, it is likely community property.  In California, the presumption is that property acquired during the marriage is community property and not separate property.
  • Separate property means one spouse will get it, community property means it is a shared asset. If the house is separate property, the owner will get the house.  If the house is community property, the house can be divided between the couple by agreement or court order.   See https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=FAM&sectionNum=2550 and https://codes.findlaw.com/ca/family-code/fam-sect-2581.html

which state that the presumption is that community property is divided equally. 

  • Sell and divide profits.

The most obvious option is to sell the house and divide the profits between the spouses.  This is clean and is often perceived by the parties as equal.  This is a good option when neither spouse can afford the house alone. 

  • Buy out.  

A buy out option is where one spouse pays the other their share of the value of the home and keeps the home.  This can be advantageous if the home if financed with a favorable interest rate, or if the home has special value in terms of sentimental value or location or design that can’t be duplicated by an alternative house. The spouse considering a buy out should weigh various factors such as the mortgage payments, interest, utilities, insurance and maintenance costs. There can be important tax implications to this decision.  For example, if by court order or agreement one spouse pays the mortgage as a form of spousal support, then the spouse paying the mortgage can claim a tax deduction for support payments, and the spouse receiving would need to claim the payments as support income.  Consulting a tax professional or your attorney on the tax consequences of the division of the house is a important step in the divorce process. 

  • Deferred Sale

A court can enter a deferred sale order to benefit their minor children as a way of lessening the impact on the children.  With a deferred sale order, one spouse and the children stay in the home but both own the home jointly for a certain length of time.   (See https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=3800.&lawCode=FAM)

There are many important considerations when contemplating a divorce, and the division of the home is one of the most vital aspects to plan out in advance.  If you are interested in more information about how your home would be divided in a divorce, please contact the Law Office of David W. Knecht, at 707-451-4502.