In North Carolina, you can’t get divorced until you’ve been physically separated for at least a year. During the separation period there’s a need for two homes while you’re still married. If you rent an apartment as the second home, then it can be relatively simple. But if you want to buy a second home when you separate, it creates legal and financial issues.
Buying a house when you’re separated but still married means that, in addition to all of the typical things to think about (finding the right neighborhood, the right house, the right price, determining what is affordable), you will have to consider
- The effect of the purchase on the marital estate,
- Establishing legal ownership in your name, and
- Owning and financing the home without the inclusion of your spouse.
When you select a realtor to help you find your home, consider that experienced, professional realtors like Armand Lenchekin Orange and Durham counties and Linda Craft in Wake County are accustomed to helping coordinate the efforts of lenders, collaborative divorce attorneys, and the seller’s realtor around the special legalities and requirements of purchasing a house as a married but separated person.
The Marital Estate
When you’re going through a divorce, you must divide most, if not all, of the assets and debts that you accumulated during the marriage. North Carolina law classifies property, including debts, as either “marital property,” and therefore subject to “equitable distribution,” or as separate property, and therefore not part of the marital estate to be divided. When you’re separated and buy a home before you are divorced, then the new home may or may not be a part of the marital estate depending on how it’s titled, whether “marital” funds are used, and the timing of the closing. And you may or may not want the new home to be part of the marital estate. It all depends.
Before deciding to buy a home when you’ve separated but are not yet divorced, talk to a good collaborative divorce attorney. The decision whether to rent or buy during the separation period should be part of the entirety of the legal and financial planning that goes into how you will divide the marital property and assets, and how you will pay your ongoing expenses after separation and divorce. Good collaborative divorce attorneys can be a critical resource during this decision-making process.
A Separation Agreement
If, after conferring with a collaborative attorney, you decide to buy a home while you’re separated, then you will likely need to apply for a mortgage. When you submit an application for a mortgage, you’re asked for your marital status. If you indicate that you’re separated, then as part of the loan application process, the mortgage lender will often want to see your separation agreement. If you are the higher income earning spouse, the lender will want to know whether you have any legal obligations such as child support or alimony that might affect your ability to repay the mortgage. Even if you don’t have either of these legal obligations, the lender will still want to see that reflected in a separation agreement. If you are the spouse with lower or no income, the lender will want to see what income you will be receiving from your spouse as part of your divorce settlement. In either case, if you don’t have a separation agreement, many lenders will not approve the loan until you have one. Your collaborative divorce attorney can help you finalize your separation agreement.
A Free Trader or Memorandum of the Separation Agreement
If you are going to buy a home while separated but still married, in addition to the separation agreement, you will want either 1) a Free Trader Agreement OR 2) a Memorandum of the Separation Agreement. These are documents signed by both spouses in which they agree that the other can buy and sell property as if they were unmarried. It also waives marital rights and interests in any real estate that is subsequently purchased. This document will need to be recorded with the register of deeds office before there can be closing on the mortgage and house purchase. Again, your collaborative divorce attorney can help you with this.
Buying a house during the separation period prior to divorce should be part of an overall plan for your post divorce finances. There are lots of things to consider and a number of legal hurdles. Talk to good real estate and financial professionals to help you make wise decisions.
