Frequently Asked Questions: Options for the Marital Home in Colorado Divorce

The court considers all relevant factors including: (a) the contribution of each spouse to the acquisition of the marital property, including the contribution of a spouse as homemaker; (b) the value of the property set apart to each spouse; (c) the economic circumstances of each spouse at the time the division of property is to become effective, including the desirability of awarding the family home or the right to live therein for reasonable periods to the spouse with whom any children reside the majority of the time; and (d) any increases or decreases in the value of the separate property of the spouse during the marriage or the depletion of the separate property for marital purposes. C.R.S. 14-10-113(1).

Writer’s practice experience tip: Spouses often think of assets with his or her name on them acquired during the marriage as individual assets and income. They may think the same with regards to income earned by an individual spouse during the marriage. However, when people marry, it is for better or for worse, even in the law, and assets acquired and income earned by either party during the marriage is marital income regardless of which spouse earned the money through employment or whose name is on the asset. There are a few exceptions such as individual gifts and inheritances.

There are generally two main options: (1) sell the home and divide the proceeds; or (2) have one spouse buy out the other spouse's interest in the home and keep it. Spouses are free to come up with creative solutions if they both agree. The court will take a simple and conservative approach if it has to decide. Creative solutions are within the province of the parties.

A few important aspects to consider are whether one spouse will buy another home or rent, and whether each spouse will be able to qualify for a new mortgage loan in their names alone or with other co-signers. Often party’s find that they can not continue to live at the same standard of living after divorce.

First, the value of the home has to be agreed on to determine the equity in the home. The equity is the fair market value of the home minus any liens on the home. The buyout amount will generally be 50% of the equity in the home. However that can vary based on the totality of the property distribution. The most accurate evaluation of home value is an appraisal. Other options are broker opinions and comparative market analyses, however those are less accurate.

If there are inadequate assets to cover the equity value for the non-retaining spouse, the home could be refinanced to withdraw cash to pay off the other spouse.

When one spouse transfers the home by quitclaim deed, that spouse's name is removed from the title but typically remains on the mortgage. The transferring spouse is still liable if the resident spouse does not make the mortgage payments. The only way to remove that spouse's name from the mortgage may be for the resident spouse to assume the loan, refinance it, or pay it off. If not, then the other spouse remains liable on the mortgage, but without having the home itself as collateral.

When the non-resident spouse's name is kept on the mortgage, this may impact their credit. They could be viewed as overextended on credit and have difficulty borrowing for a home mortgage for him or herself. Additionally, the bank will still pursue anyone on the mortgage for nonpayment, regardless of to whom the state court allocates the mortgage responsibility. The mortgager is not bound by the state court order, though the parties are.

Consider the spouse's current and projected income (including any spousal support), monthly expenses, the mortgage payment (including principal, interest, taxes, and insurance), and whether the spouse has sufficient cash flow to maintain the house. Keep in mind that lenders expect a spouse to receive spousal and child support for a period of time before they will consider it as a source of income.

A home is "underwater" when the homeowners owe more on their mortgage than the house is worth—that is, the mortgage balance exceeds the current market value of the home. This means that the owners would have to pay to sell the home unless the lender will agree to a loss mitigation approach such as a short sale.