When you’re in the middle of a divorce, there are plenty of things that you have to think about. At the top of the list when it comes to property division, however, is the family home. Deciding what to do with the house during a divorce isn’t an easy process, but you do have plenty of options that can help shape your decision.
Often, one spouse–typically the one who ends up with primary custody of the kids during the divorce–will end up keeping the home, while the other spouse moves out. This can be accomplished a couple of different ways: it may be decided that one spouse will keep the house, but will have to take over payments on it, or one spouse may buy out the other.
If you’re thinking about keeping the house while you’re in the middle of a divorce, there are several questions you should ask yourself before the decision is final.
- Is your income alone up to handling the demands of home maintenance, keeping up with payments, and the other necessities that come along with home ownership? Make sure that you factor in homeowners insurance, your mortgage, and property taxes that will have to be paid each year.
- Do you have negative memories or associations with the home colored by your former spouse? Are those negative associations going to remain even after you’re able to move on?
- Would you be comfortable bringing a new partner into the home that you shared with your former spouse?
- What assets are you going to have to trade in order to keep the house? Some partners may end up having to forego retirement accounts or give up substantial savings in order to keep the house during the divorce.
- Does keeping the house minimize disruption in the kids’ lives throughout the divorce, or is the house itself fairly insignificant to them? Your children might consider keeping the house more significant if it’s a place they’ve lived most of their lives, but if the family has moved often, they’ll have less attachment to the house.
- How will you take care of basic home repairs and maintenance if you keep the house? If your spouse typically took care of such tasks as mowing, cleaning the gutters, and putting things that broke back together, you’ll need to either learn to handle those tasks yourself or hire someone else to do it.
Before making a decision about whether or not to keep the house in your divorce, it could be helpful to consult a financial planner to help you determine whether or not you have the means to take care of the expenses associated with keeping the house. They’ll be able to give you an accurate cost breakdown based on the size of your house, the area where you live, and your current income, including anticipated child support or alimony. Keep in mind that if you’re keeping the house, you’ll need to refinance it in your name alone and that payments may change as a result of the difference in your credit and your newly single status.
Give It to Your Spouse
The flip side of keeping the house is letting your spouse have it (or allowing them to buy you out so that they get ownership of the house, but you get other resources). If you’re going to go this route, make sure that you keep several things in mind:
- Insist that your spouse refinance the house or create legal orders showing that they’re responsible for payment so that you won’t take the hit on your credit, which could prevent you from buying a house of your own.
- If you’re going to keep the existing mortgage, decide whether or not you trust your spouse to keep up with the payments: failure to pay will hit your credit just as hard as theirs if you’re named in the mortgage.
- Consider paying alimony or other payments to your former spouse directly to the mortgage company if your spouse will be taking over the house. This will help ensure that your credit report won’t get hit because they haven’t been paying.
You should talk with your mortgage loan originator to be sure that you’re making the right decision for your family in deciding how to proceed with the existing mortgage. Giving up the house may mean less disruption for the kids and the assurance that they have a solid roof over their heads, but you want to be sure that you’re protecting yourself and your finances appropriately.
You put a lot of effort into choosing this house, decorating it just the way you wanted, and transforming it into a home for you and your family. Letting it go may seem downright painful–but for many individuals, selling their home after their divorce is the easiest way to put that shared debt behind them and move forward with their new lives. The house was purchased to be a family home, intended for two spouses. For most families, that also meant two incomes going into paying the mortgage and taxes and taking care of home repairs. Facing those costs on a single income can be daunting!
If you wouldn’t buy the house again as a single individual or neither spouse is able to handle the upkeep alone, selling it may be the way to go. You’ll be able to pay off the mortgage, split the money that’s left over, and make a fresh start in a smaller home that is more appropriate for your single status. Before selling, consult a CPA to understand the impact of the taxes you’ll need to pay following the sale of your house.
In some cases, it may not be feasible to sell the house right now. The market might not be the greatest, it might be a terrible time of year to try to sell the house, or neither of you may be up to the task of preparing it for showings. Renting the house is a viable option. You can choose to do this for a predetermined period of time, after which you’ll move forward with selling the house, or to continue to rent it out indefinitely. Renting brings with it its own set of considerations, including:
- Whether or not houses are easy to rent in your area. Talking with a real estate broker can help you determine whether or not renting will be a viable option for your home.
- Who will handle rental details: will you go through a rental company, or will one spouse handle the details of finding renters, advertising, and dealing with any problems with the renters?
- Are you able to handle keeping up with the mortgage payments if you have time between renters or they default on their payments?
Renting out the house long-term is rarely a good option for couples who are trying to separate their finances and their lives. Renting for a period of years, however, can allow home values to rise and ensure that you’ll get more value out of the sale of your home–particularly if you paid more for the house than its current value.
Getting a divorce isn’t an easy process. Taking the time to think through all of your options when you’re ready to decide what to do with the house will help ensure that you make the best decision for your entire family, including your financial future. If you’re ready to put your house on the market or need more information before making your decision, please contact me to discuss.