Divorce and Your Home
Your situation is more complex than that of the average home seller or buyer. There are many decisions that you will need to make. One of the most important decisions is what to do about the house. What you need most is some non-emotional, straightforward, specific answers, information and advice. Once you know how a divorce affects your home, mortgage and taxes, making those critical decisions become a little bit easier. There are some questions that you’ll need to ask yourself so that you’ll be able to make an informed decision:
- Are you comfortable remaining in a familiar place or would you rather have a fresh start somewhere else?
- Can one party bear the financial responsibilities of your current home, or would it be wiser to sell and buy a more affordable home?
- Consider all of your options: is refinancing possible?
- If you choose to buy a new home, what can you find within your price range?
You have 4 basic options at this point:
- Sell the communal home and divvy up the proceeds
- Buy out your spouse and own the whole home
- Sell your half of the home to your spouse
- Keep joint ownership temporarily
It is a good idea to take some time to fully understand how each option will affect you and your family, before you decide which option you’d prefer.
1. Sell the Home and Divvy up the Proceeds
his option gives both you and your spouse a chance to move on and start over, if that is what you’re looking to do. But in some cases one or both of you may want to remain in the home for emotional or logistical reasons. If you choose this option you want to make sure that you are fully aware of what your net proceeds will be. That is, the amount that will be left in your pocket after necessary expenses and the division of funds between both parties.
The proceeds from the sale of your communal home may not be divided in half; instead the division of proceeds will depend on the result of your settlement and the property laws in your area. If you choose this option it is best to maximize the home’s selling price so that each party receives a large enough amount to fund the purchase of a new home, or start over in a way of their choosing.
2. Buy Out Your Spouse
This option allows you stay in the comfort and familiarity of your home, but also requires a lot of financial responsibility. If you choose this option you’ll want to be sure that you can manage the financial weight of the property on your own. Even if you will have no problem doing this, since your loan was most likely secured by the income of both parties, you’ll need to refinance the property on your income alone. This may be difficult to achieve, so be sure to research the feasibility of this option and speak with a lender for advice before committing.
3. Sell Your Half to Your Spouse
This option will give you the opportunity to move on and start fresh somewhere new, but also comes with its share of financial implications. If your communal home is not refinanced to your spouse alone, the lender will still consider both you and your spouse responsible for the loan. This may make it difficult for you to get a loan for your new home, even though you no longer own your communal home.
4. Keeping Joint Ownership – Temporarily
Some couples may decide to keep joint ownership of their communal property, but requires you to decide if one party will continue to reside in the home or if neither will reside in the home and you’ll rent it out. This is almost always a temporary situation, and comes with its share of concerns. This option will have no immediate effect on your financial situation, but will have implications when it comes to filing your taxes. This option is also one of the most difficult, as it requires continued communication between both parties and essentially delays the decision to proceed with options 1 through 3. We would only recommend this option if it is an amicable divorce and there are extenuating financial circumstances, such as huge penalties for refinancing your mortgage.
We have worked with many clients going through a divorce, and some of us have been through divorces ourselves. No two are alike and we have helped our clients through a wide spectrum of circumstances. Above all we understand that a divorce is never a walk in the park. We strive to work with each client’s situation in a way that minimizes the stress and anxiety of selling or buying a home while going through a divorce. A REALTOR® is an unemotional third party, who can help you to make informed and logical decisions rather than emotional ones. Let us handle the sale of your home, so you can concentrate on your needs and the needs of your family.