I’m Getting Divorced. What Happens to My House?
It makes sense. This is the home you raised a family in. It’s filled with memories. Naturally you feel an emotional tie. But if you’re not careful, your connection to your family home could hinder your financial future.
So how do you really know whether keeping the house is your best bet? And how do you navigate all the decisions that come with owning a home after a divorce?
Below is a list of questions and answers to help you make decisions about the house during divorce.
Can I afford to keep the house?
Unfortunately there isn’t an easy answer. There are a lot of things to consider before you decide whether to keep the house. First, you need to know the value of the home. Second, you need to think about the long-term costs of maintaining the home. For example, you’ll have to account for property taxes, mortgage payments, maintenance (you know that toilet isn’t going to fix itself) and dips in the market that may lessen the value of the home should you decide to sell.
You should also factor in any assets or debt that might result from your settlement and any support you’ll be given (is your spouse providing alimony or child support?).
Still not sure whether it’s in your best interests to keep the house? Download our list of pros and cons to help you decide.
What happens to the mortgage?
How the mortgage is handled is something you’ll want outlined in your divorce decree. There is no “one size fits all” decision. Some people choose to sell the house, while others refinance in one person’s name. Everyone’s situation is different, so it’s best to talk it over with a certified divorce financial analyst (CDFA®).
What’s the process for selling the house?
You’ll go through the same process as you did when you first bought the home. First, find a neutral realtor (to make life easier, some people choose to use the realtor who originally sold them the home). Then you’ll get an appraisal and list the house. One of the toughest parts of selling is staging the home for showings. If both you and your ex-spouse have moved out, you’ll probably have to do a thorough inspection to see if any repairs are needed.
Who is responsible for the house until it sells?
This should be covered in your divorce decree. Talk to your attorney if you’re unsure.
Who gets the proceeds from the sale of the house?
This is determined by the divorce settlement agreement.
Can we keep the house as joint owners?
Yes – and some people choose to go this route. When divorcing couples co-own their home, they have to agree on several factors, including how they’ll split expenses and mortgage payments and who will live in the house. For amicable couples, this can be a huge advantage.
The disadvantages? Let’s start with the obvious. If you and your spouse do not get along, this could be a nightmare. Second, if one of you files for bankruptcy, you could lose the home.
Will I owe taxes if I’m awarded the house during the divorce?
No. There are no taxes on transfers made during a divorce. You only have to pay capital gains if you sell your home and have a taxable gain.
What if there’s no equity in the house?
Even if there’s no equity, you still have to determine the value of the home because it’s a marital asset. If the home has no equity, selling may be a better option since you don’t have to worry about mortgage debt.
As hard as it is, try to remove emotions from your decision and do what’s best for your financial future. I’ve seen many couples make decisions about the house solely based on how they’re feeling at the moment – not whether they can afford it. While it’s tempting to cling to what you know and are comfortable with, it’s not a good idea to do so at the expense of your family’s finances.
At the end of the day, remember that no matter what happens to your home, those memories you made aren’t going anywhere. Focus on the positive: if you decide to sell your house, you get to start fresh and make new memories somewhere else.
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