Getting divorced affects everything in your life. During this difficult time you are expected to make decisions that are not easy. These decisions can have an impact on you financially long after the divorce. Understanding your options and their potential consequences will help a lot in finding the best solutions for your circumstances.

Whether to sell or keep the family home is a major decision. Not only is it a major financial decision, but it may be fraught with emotion as well. Here are some options and what to consider.

Before deciding whether to sell the family home or to keep it, do your homework.

  • What is your house worth in the current real estate market?
  • What is the debt on the house?
  • Could you be better off taking or giving other assets in exchange for your share in the family home (ie. retirement account or brokerage account)?
  • What would be the benefits of selling / keeping your home?

Options for keeping the family home

Keeping your house comes with certain responsibilities.

  • Can you afford to make the monthly mortgage payments?
  • Will you be able to refinance the house and put it onto your own name?
  • If you keep the house and something breaks, can you afford to have it fixed (eg. replace the roof)
  • Will you be able to keep up with the maintenance of the house?

If you want the house and can afford it, then keep the house. Real estate is an excellent investment and you should be able to see the returns on the long term.

1.  You can buy out your spouse’s share of the family home and keep it.

If the original mortgage is in both your names, you will have to refinance it on your own merit. Make sure that this is possible before committing to buy out your spouse. If finances are really tough, you could consider taking in a roommate to help cover costs.

2.  You can continue to own the house jointly with your spouse.

This is sometimes a good solution when there are children involved and both spouses decide to disrupt them as little as possible. Make sure that you consider the potential tax consequences once you are divorced. Also keep in mind that your spouse may be able to take out a second mortgage on your house without you knowing about it. This could damage your credit rating if you are on the mortgage. All agreements regarding owning the house jointly with your former spouse should be in writing.

3.  You could rent the family home on a month-to-month basis and sell it later. This could be a viable option when the housing market is down. You then don’t need to list the house until the housing situation is more promising and you will have a way to pay the mortgage while you wait.

Options for selling the family home

1.  You can sell your share of the house to your spouse.

This should be able to provide you with funds to find another place to live. There could be tax implications on receiving this money, so make sure that you are aware of them. Also make sure that you do not remain on the mortgage once you have been bought out. If you are still listed on the mortgage you are still liable for any late payments (ruining your credit), back taxes, etc.

2.  You can sell the house together and split the proceeds.

If neither of you can afford to keep the house on your own, you can consider selling it together. If you sell before you get divorced, you will have to pay less capital gains tax than you would have to if you were to sell later as an individual. In order the sell the house quickly, you should price the home reasonably. If you expect the highest possible price, you must be prepared financially and emotionally to wait for a great offer on your home. Most people are not in position to take their time selling the house. If you need to sell as soon as possible, you can get an instant cash offer here. Other less desirable options are to consider a short sale, which is when you agree with your bank to sell your house for less than the mortgage or to choose foreclosure, which affects your credit rating for the next 7 years.

Advantages of selling the family home

  • If you decide to sell, neither spouse needs to worry about whether they will be able to quality on their own income to refinance it on their own name
  • You don’t need to worry about how to make the mortgage payments.
  • You can use your share of the profit of the home sale to prioritize your new financial goals.
  • You can make a clean break and start over new.

Regardless of how unpleasant a divorce may become, don’t forget to continue paying your mortgage, property taxes and other bills. If you don’t pay your future chances of refinancing or becoming a home owner will be negatively impacted. If your partner refuses to help with the payments, you can keep the receipts and use them to get a reimbursement during the settlement process.

Every divorce is different. No single solution will be right for everyone. However, when you understand what options you have regarding whether or not to sell the family home, you can make the best choice to suit your needs and finances.

 

SnH Homes are not Attorneys nor Accountants and we would advise that you seek professional advise prior to making decisions.  We are Real Estate Investors and the above post just gives some ideas of what may be possible.

 

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