Friday, September 28, 2007

FAQ regarding Divorce # 16: Is there a way for me to continue living in the house with the children?

This question commonly arises for the simple fact that parents often believe that it is best for their children to have continuity by living in the same house. The equity in your home is like any other asset that is subject to division by the Divorce Court. The home can be sold and reduced to cash, but oftentimes this is not necessary. Sometimes, another asset can go to the other spouse, including retirement accounts of either spouse, to offset the large amount of equity received by the spouse who keeps the house.

Also, like any other commercial transaction, one spouse can essentially “loan” money to the other by taking back a Note and Deed of Trust (usually “junior,” or of a lesser stature, to the financing or mortgage used to purchase the house). This relationship is sometime referred to as an Owelty Deed or Owelty Lien, or sometimes as a Second Deed of Trust. This is nothing more than one spouse promising to pay the equity in the home over time (with a Promissory Note or simply a Note) and the other spouse receiving a Deed of Trust or other form of security so that if the Note is not paid, that party has recourse to ensure payment (which may include the ability to foreclose upon the house).