California community property rules give both spouses an interest in property acquired during their marriage. They also make both spouses responsible for marital debts. In some cases, the most valuable property spouses own together may also relate to the most significant debts they owe.
Frequently, both spouses have their names on the deed for the home where they live together, which protects their interests in any accumulated equity. They may both also be on the note for the mortgage, which makes them both responsible for the remaining balance owed on the loan.
How can couples who share a home and a mortgage address their marital house during a California divorce?
Both spouses are responsible initially
In the early stages of divorce, spouses may need to work out an arrangement where they continue to share certain expenses. Technically, they are both still responsible for the mortgage, even if one of them leaves the marital home before the completion of the divorce.
When the spouses or the courts seek to resolve property division matters, both the accumulated equity represented by the home and the outstanding principal balance on the mortgage can play a major role in the property division process. Especially if one spouse keeps the home, they may need to make concessions on other aspects of the property division process to ensure a final settlement that aligns with community property statutes.
Typically, the spouse staying in the home refinances after the divorce. They can withdraw equity as part of that process to compensate the spouse who leaves. Even if they do not withdraw anyway, refinancing is typically necessary to remove the other spouse’s name from the note. Occasionally, both spouses may remain on the mortgage temporarily until the spouse retaining the home improves their credit or rebuilds their career so that they can qualify for a mortgage on their own.
Reviewing financial details of one’s marriage with a divorce attorney can help spouses protect their interest in home equity and limit the risk of joint mortgage responsibility damaging their credit score or hosting opportunities. Homeowning spouses who are preparing for divorce may need to address both the debt that they owe and the equity they have accumulated to reach a reasonable property division settlement, and that’s okay.