One of the first things that is discussed when filing for divorce is – who gets the house? Of course, the decision is usually so filled with emotions and other considerations that many people get bogged down. Here are few things you will want to consider.
Can You Afford To Keep It?
If you are the one hoping to keep the family home, there are some financial obligations to consider. You and your partner may have been able to afford the mortgage, insurance, repairs, maintenance, property taxes, utilities and other expenses. Can you still afford all of these payments on your own? If not, you might want to consider an alternative plan.
Often, you will be required to buy out the other owner in the property. The value of the home is assessed, minus any mortgages owed on it. You could possibly “trade” assets, if you own multiple assets and can come to an agreement. You might also be able to refinance an existing mortgage and pay for your spouse’s half of the house from your new mortgage proceeds.
If you can manage to keep the home, it could give you stability, but paying late or falling seriously behind on payments can have serious consequences. Choosing to sell the home could be another financially wise option if neither party can afford to keep the home, and the sale could provide total closure on your divorce while putting extra money in both pockets, given there is equity in the home.
Can You Afford To Sell The House?
Some may think keeping the home would provide them with a better financial future, but often times selling ends up being the better option. Find out how much equity is in the home, and whether it is best to split the debt/income on the property before you make that decision.
Is Your Spouse Keeping The House?
Once a divorce is final, a lot can change. Your ex can date again and get remarried, while living in your past family home. To protect yourself and your contribution to the equity of the home, get an appraisal. This will give you an idea of the amount you could expect to receive when your spouse buys you out of the home.
Does Joint Ownership Make Sense?
It may make sense to own the house jointly for an extended period after divorce. For example, Dad can agree to let Mom and the kids live in the house until the kids graduate from high school. As long as the divorce decree provides for Mom's exclusive use of the home, Dad will be able to realize his share of the gain when the home is sold, and possibly get more than anticipated since the home is still increasing in value.
Taxes On The House
If you're awarded the house in your settlement, whether you choose to remain there or sell, you'll have serious tax implications to consider. Before you decide to keep the house, be sure you consider capital gains taxes. Individuals are allowed up to $250,000 in tax-free capital gains when they sell their home. Couples are allowed $500,000. To qualify, you must have lived in the home for at least two of the five years prior to the sale. There is no age requirement.
Before you make any decisions it is important to think long term and to speak with not only your attorney but also your personal tax person. If there is anything I can do to help don’t hesitate to call on me.