Here’s the thing. It’s almost always a better idea to let the house go rather than try and keep it. Trying to save the house usually means reworking financials in an attempt to make it feasible. And that usually results in both sides suffering.
We know that couples want to keep the house for the benefit of the kids. More times than not, though, it actually may end up hurting the kids indirectly. If keeping the house is financially feasible from the very beginning, then you have a better chance of keeping the house through divorce mediation. What else should you consider? Let’s explore.
How to Keep the House in a Divorce?
If both partners are willing and able to cut back so that one can keep the house, then there are good options. But that will only work if one party can qualify on his/her own to refinance the house and buy out the other partner. Keeping both names on the mortgage loan and/or co-owning the home (keeping both names on title) may not be the best way to move on with life. It can be done, but it comes with some risks and potentially unexpected tax and legal consequences.
Calculate the Home’s Value – Equity
You’ll need to find out how much the home is worth. The only way to definitively find out the current fair market value is to actually sell the house. If you don’t want to do that, the typical way would be to pay for an appraisal, or use the appraisal you will be required to obtain if you refinance. Before paying $400-$500 for an appraisal, which is usually a subjective opinion and may be inflated or deflated depending on the reason for the appraisal, you might be able to agree on a value based on a combination of online tools, such as Zillow, Trulia, Realtor.com and/or Broker Price Opinions (BPOs). As these are all just subjective opinions based on comparables, averaging values from these sources may get you as close as you would with an appraisal. Then, you’ll need to take into account any necessary repairs, fixes, and other issues around the house. Once you can agree on the value and how the equity would be split, then you can start talking about the financial arrangements going forward.
Reasons NOT to Keep the House
Like I mentioned at the top of this blog, there are usually several reasons that support NOT keeping the home, such as:
- It’s just not financially feasible. The hard truth is that you and your spouse may not qualify to refinance or assume the Mortgage loan on your own, or it may be too big of a financial burden to do so. You don’t want to begin your next chapter of your life on the edge of financial difficulties.
- The equity in the home might be too much to keep tied up in the home. You might be able to make a clean break, pay off debt, and put a down payment on another property with what you take from the home.
- The house requires too much work. If your home has turned into a project home or needs renovations, it might prove to be a burden. You may not need that at this point in your life.
- Mitigate your risks. You don’t know how much your home is really worth until somebody buys it from you. Until that point, you’re making an (educated) guess. That guess carries risk.
Play it Smart
If you know going into this that you can afford to refinance the home and support it on your own — mortgage, maintenance, and all — then it might make sense to keep your home through a divorce. Otherwise, the best option might just be to take the emotion out of it and leverage the home for a better future going forward, for both of you and your kids.
If you want to discuss your specific situation, please give us a call at 602.622.2008.