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Who Gets the House In A Property Settlement?

The simple answer is: whoever can afford it. The slightly more difficult question of ‘who can afford it?’ can only be answered by first working out the basis for a property settlement and what each party, overall, is likely to be entitled to.

Section 79 of the Family Law Act 1975 sets out the things a Court must take into account when determining each party’s entitlement to the property they both own. The first step, however, is to determine exactly what the parties own and how much it is all worth, less any liabilities, to arrive at a net value – the net ‘property pool’.

Once the size of the property pool is known, an assessment is then made of each party’s entitlement to it, taking into account what they contributed to the property pool at the start, during and after the relationship (including home-making and parenting), and also each party’s relative financial position and future needs.

Once each party’s overall entitlement is determined, the next step is to look at what property each party has already retained / wants to retain. If the total value of one party’s property (assets minus liabilities) is less than what they’re entitled to, this imbalance is usually rectified by the other party paying the first party a sum of money to ‘balance up’ both parties’ overall entitlements.

Whilst the equity in a house (value minus any home loan) simply forms part of the total value of the property that one party is to retain, if there is a home loan on the property in joint names (or in the other party’s sole name), the party who wants to keep the house will need to refinance (borrow enough money to pay out) the existing loan into their sole name, thereby freeing the other party of the debt. If it is expected that the other party will need to pay a lump sum to ‘balance up’ both parties entitlements, this may assist the first party to raise sufficient funds to refinance the home loan into their sole name.

If the party who wants to keep the house cannot raise sufficient funds to refinance any loans secured by a mortgage on the house, and the other party does not wish to retain the house (and refinance it themselves as the case may be) then the house will need to be sold with the net sale proceeds divided between the parties.

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