Many major decisions need to be made in a divorce, and one of them is what to do with the family home. It’s very easy to make a mistake in this area because you likely have a sentimental attachment to the home. Before you make a final decision on how to handle the family home in your divorce, here are four questions you need to answer.
What’s the Real Value of the House?
Simply knowing the home’s market value on paper isn’t enough. You need to determine the marital value, which is the portion of the value you and your spouse actually own. This is going to be the value left over after you deduct anything on the home that takes equity from you, such as your mortgage or other liens. If you think the house could be all or partly separate property–property that solely belongs to one spouse–ask your family law attorney for help here.
Can I Afford the House?
Houses have a lot of expenses, including the real estate taxes, insurance, mortgage loan and upkeep. You need to determine whether your post-divorce budget will be able to handle those costs. To do so, take a look at your income and your expenses. Be realistic; even if you expect to get spousal or child support, there’s always a chance your spouse won’t be able to pay, so you can’t rely on that money to cover essential costs in your budget.
Can I Refinance the Mortgage?
If your home’s mortgage is currently in both of your names or your spouse’s name alone, you will likely have to refinance that mortgage to remove your spouse from the loan. Otherwise, your spouse would still be liable for the loan even though they no longer own the house. Understandably, your spouse is unlikely to be willing to do that.
To refinance on your own, you’ll need to prove income and your ability to pay just as you would getting a new home mortgage. Your credit will be considered, too. Keep in mind that some lenders will not consider your child or spousal support as income until you’ve received those payments for a set period of time, such as six months in a row.
What Intangible Factors Do I Need to Think About?
While financial considerations are pretty crucial when you are thinking about how to handle a family home in a divorce, there are non-financial factors to think about, too. If you have kids, for example, having to move from your home right now with them can make the situation worse for them, especially if they are already struggling.
Take your emotions about these intangible factors into account when deciding what to do, but don’t let them run the show, either. If you run the numbers and discover you simply can’t afford to keep the house, you need to pay close attention to that. Having the house for a year and then losing it to foreclosure is going to be a bad experience for you and your kids. Plus, you will have lost something that could have helped you financially in your post-divorce life, as you would have likely traded other assets to keep the home during your property settlement.
However, if your numbers show you can afford the home, keeping the family home is certainly a possibility. At that time, you’ll be able to take all of those non-financial factors into account before you make your final decision. If you are not sure what your options are for the family home, ask your family law attorney to explain them to you so you are making a fully informed choice.