Divorce and Transferring the House

Thanks to Nicole N. Middendorf (Certified Divorce Financial Analyst) for this post! See her contact info below.

Strategic Financial Incorporated

Nicole Middendorf

When you get divorced and are taking the house as part of the divorce, there are no tax implications on the sale of the house if you have lived in the house for two of the last five years and profit no more than $250,000 as a single person or $500,000 if you happen to sell as a married couple.

The important thing to know with a house is that a title of ownership of a house is separate from whose name is on the mortgage. You may be told or asked to sign a quit claim deed when the divorce is done. What this does is it takes your name off the house but not off the mortgage. What that means is that you are financially responsible for the mortgage debt but have no ownership interest in the house. You do not want to sign this document if you are not taking the house as part of the divorce until the other party has refinanced. For, if you sign the quit claim deed and your name is still on the mortgage, you have no ownership rights to the house but are responsible for the debt.

When you take the house as part of the divorce you want to refinance the property to get the mortgage in your own name. You can check to see if your mortgage company will put the loan in your name without refinancing but most companies will not. So, you want to refinance and have the other party sign a quit claim deed so that you own the house by yourself and that you owe on the house by yourself.

To decide if you should take the house as part of the divorce is a decision that you make by taking an assessment of your complete financial picture and looking at all the assets and liabilities and by looking at whether you can truly afford the house on a monthly cash flow basis and from a long term maintenance standpoint as well. This is something a Certified Divorce Financial Analyst can help you determine.

Contributed by:
Nicole N. Middendorf, CDFA
Certified Divorce Financial Analyst
LPL Financial Advisor
15600 35th Ave North, Suite 101
Plymouth, MN 55447

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