4 Reasons to NOT Keep the House in a Divorce
A house is more than stone and two by fours. Our house represents stability, security, and status. It may be the biggest asset we own. If there are young children, the house may represent a great school district. Before fighting to keep the house, go through the financial obligations of that house with as little emotional bias as possible. If keeping this asset is what you want, this needs to be YOUR best financial decision years down the road.
1.) You can’t keep the house if you can’t afford the house.
A house is just more than mortgage payments. If the total amount of the mortgage, real estate taxes and insurance equals one third of your income, you will probably end up being house poor. If you’re factoring in child support or alimony to pay, you better make sure your ex will pay what is due. Going back to court to get money owed, costs money too.
2.) A home costs us more than mortgage payments.
Thinks about the taxes, and the cost of maintenance and repairs. If a new roof, furnace, water tank are to be replaced soon, money MUST be set aside for these issues when they arise. Owning a home involves cutting your grass, yard work and up here in Buffalo shoveling snow. If you are not up for doing that work, factor in the cost of these services. If you are already avoiding cutting the grass and snow removal by owning a condo or townhouse these items are addressed in your monthly home association dues. However, a special assessment may be imposed in the near future. These can be costly and a potential strain to cash flow and or savings.
3.) We don’t know what the future holds.
There is no guarantee that the home will be worth more than it is the present day.
If you sell now, both your spouse and yourself share the risk on the sale of the house. Either you both may win, or both will lose. By owning the house by yourself you bear all the real estate market risks that come with it.
4.) If you are going to keep the house, you must be able to refinance the mortgage.
If the mortgage is held jointly, there is only one way to get your spouses name off the mortgage. That is by either refinancing or selling the house. Most mortgage companies will not allow you to remove a spouses name due to divorce. Lending standards are also more strict than they were prior to 2008. If one spouse wants to keep the house they will have to find out if they CAN get approved for refinancing. If the spouse that desires to keep the home does not have a high enough income, they may not be approved to refinance the home.
The decision one makes regarding the house in a divorce has as much (possibly more) to do with emotions as it does with money.
If we make decisions based upon emotion, you may very well end up making a bad one.
Keeping the house for your children is great to not add more upheaval in their lives. But if keeping the house today, means you lose it due to foreclosure, your children nor yourself will be better off.
Be honest in evaluating this decision. Talk to a mortgage broker to establish if refinancing is possible. Talk to a Certified Divorce Financial Analyst or a financial planner to make sure all of the obligations that come with the house are affordable with your current/future cash flow.