Should I Keep the House?
When going through a separation, you must answer many questions and make many careful decisions about your future. This includes the, ‘should I try to keep the house in my divorce?’ question. And there is often more than “one right answer.” Of course, there are strong reasons you may want to stay in the marital home, but what are your options?
- You keep the home.
- Your spouse keeps the home.
- Sell the home and divide the net sales proceeds (and maybe pay off debt, too).
- Both of you own the home for a certain amount of time and then sell the home.
- Both of you own the home for a certain period, and one buys the other out of the marital share of the equity.
Regardless of which option you prefer and before you decide which choice is best for you and your family, here is a snapshot of the initial questions you should consider:
- Look at your “why.” Are you hoping to keep the home because it offers financial stability, to build equity, or to allow you a sense of freedom? Does the home feel consistent when all else is changing? Do you have an emotional or sentimental attachment to the memories you have made in the home more than the building itself?
- How long do you plan to stay in the area? Consider the ages, schools, extracurricular activities of your children, if any, and how that affects this decision.
- How well do you budget? Often divorce is the very first time people take a deep dive into their finances and spending habits. Do you stick to a monthly budget and keep everything balanced? Or are you behind on some bills?
- Are you in debt? How will that debt be divided in the divorce? Are you taking on the lion’s share of debt? How will these debt payments affect your monthly budget?
- Have you compared home prices in your area? Are mortgages currently more affordable than rent? Or vice versa? Can you (or, rather, should you) downsize?
- Have you met with a lender? Could you prequalify for a refinance or a new mortgage? Do you have funds set aside for closing costs or down payment? Have you evaluated your credit score?
- Do you have savings? Are you getting a lump sum of funds from the divorce? Are there tax implications to receiving this lump sum?
- Do you have a secure job? Have you been employed for more than a year with no relocation requirement in the foreseeable future?
- How will you address home repairs and maintenance? Do you have time and money in reserve for unexpected necessary repairs? Do you mind small do-it-yourself projects, or will you need outside help?
As you can tell, much goes into the assessment of your personal decision of whether staying in the marital home is the right answer for you. Here are some other factors to consider when trying to answer the ‘Should I try to keep the house in the divorce?’ question:
What is the Marital Value of the home?
The marital value is the marital portion of the equity in the home. You will need an appraisal of your home to assess the age, size, amenities, condition, and location. An appraisal is an opinion, which may be challenged by another’s opinion. In other words, values can be disputed. The only way to know for CERTAIN what your home is worth in the market is to sell the home.
Can you afford the house (and all that includes)?
Owning a home includes much more than the monthly mortgage payment. You need to know the expense of real estate tax, insurance, association dues, maintenance, and repairs, both anticipated and unexpected. Ensure your budget will account for these costs along with reserve funds set aside to support inevitable homeowner emergencies. Gutters must be cleaned, appliances will need to be repaired or replaced, and the lawn will need care. Further, how much of your income is relying upon funds from your ex-spouse? If those support payments are late or unpaid altogether, that affects your ability to pay timely or can require the use of your reserves. Keep in mind that if you are going to pull out equity to buy out your spouse, your monthly mortgage may increase. Realistically and honestly assess your budget to determine you can pay for the house on your own.
If I keep the house, can I refinance it?
You may need to remove your spouse’s name from the mortgage into your sole name. Refinancing is not always easy, and you should have a high enough and sufficiently stable enough income to pay the mortgage in order to qualify to refinance, as well as a solid credit score and an acceptable income to debt ratio.
Should we sell now?
The benefits to selling now include ending the debates over who should keep the house and what it is worth. Also, mortgage debt (often the marriage’s largest debt) is eliminated for both spouses. Further, everyone shares in the costs of the sale because net sales proceeds are divided at the time of sale. You also reduce the potential risk of later being in an unstable housing market.
However, these benefits also provide risks. A sale now would force the current market on both parties and prevent future growth in equity. Also, spouses may feel pressure because of the looming divorce to sell at a lower price to sell immediately. A sale now could be a lot on your plate when everything else is changing. Selling a home is not always an easy task and going through a divorce is often very time-consuming. Both events together could be very overwhelming. Also, both spouses and the children will be uprooted in the event of a sale now.
You must balance the benefits and the risks to determine if now is the right time to list the home for sale.
How do you decide?
Whether you keep the marital home is a very personal decision, but you must be thorough in your evaluation, ensuring your decision aligns with your long-term goals. Consider all financial factors along with the benefits and risks to you. Talk to a Real Estate agent about a market analysis; get an appraisal; talk to a mortgage broker about pre-qualification; and talk to a financial planner to assess your budget and long-term financial plans.
Ultimately, there is no magic formula and no one size fits all option. You need to be informed and realistic about your income, your spending, your debt, your budget, and weigh all the financial factors against the personal preferences you have. So, should you try to keep the house in your divorce? It is absolutely a personal decision, but you should also be smart and well-informed in making it.
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