For most couples, the marital home represents the largest single asset they own. It is typically a major focal point of the divorce settlement. For the spouse contemplating retaining the home, here are five major considerations to properly make this decision:
- Why do you want to keep the home?This is a very important, and often difficult, question to answer. For some, the marital home is where the kids are being raised and maintaining consistency for their sake is very important. For others, the home is a painful reminder of the breakdown of the relationship. There may be sentimental ties to the home. Maybe the home is close to your workplace or your kids are in an exemplary school district that you just can’t uproot them from. There are many emotional, financial, and practical considerations. Take the time to fully consider what is best for your specific circumstances.
- How much is your home worth? How much equity do you have? How are you determining the valuation? What is the future market outlook?The purpose of these questions is to try and look at your home as an investment. If your home value is underwater (you owe more than it is worth) or the market values are in decline (as was the case from 2007-2012), then it may not be in your best financial interests to keep the house. A good way to get an estimate for what your home is worth is to ask an experienced Realtor to prepare a Comparative Market Analysis (CMA) for you. Most Realtors do not charge for this service.
- Exactly what is it you are keeping?Is the roof in good condition? Is the A/C unit about to go out? Foundation problems? It would be wise to spend the money on a comprehensive home inspection to identify the existing and potential repair issues. You can use the inspector’s punch list as part of your equity settlement negotiation. Are there unpaid property taxes or any unknown liens on the property? Have a title search run by a reputable title company to check this out.
- Can you afford the home on your own?For most people, a divorce negatively affects their financial status. Household income goes down and expenses go up as there is no longer a partner to help contribute. In addition, there may be child support and/or spousal maintenance that must be considered. It is prudent to visit with a financial professional and create a post-divorce budget to determine whether you will be able to afford the home after the divorce is final.
- Can you qualify to refinance to remove your spouse from the note?Even if you feel like you can afford the home on your own, it is likely that your spouse will be advised by their attorney to require you to refinance the home within a certain period of time to remove them from the existing mortgage obligation. You will want to consult a mortgage lender that specializes in divorce situations to find out your options and to get pre-qualified.
There is no right or wrong answer about what to do with your home. Every couple has a unique set of circumstances. It is my hope that this article will help YOU gain clarity about what is best for YOUR unique situation.