The divorce is almost final, and it turns out you are getting the house, which is great news! It’s the house where your children grew up and made happy memories, and now they don’t have to leave their friends or switch schools. You don’t have to worry about packing up your things and trying to fit them in a different space, or about starting all over in a new place.
Before you sign those papers, however, it is important you understand all of your rights and responsibilities regarding transferring ownership and taking over the deed.
Keeping a home when you cannot afford it is one of the most common mistakes made during divorce. In the long run, taking some time for due diligence before making a final decision is in your best financial interest. Consider the following when thinking about taking ownership or buying out your ex’s interest in the family home during asset division.
Order a valuation of your home
This is the most important step, as you must know how much the home is worth in order to make an informed decision. Typically, you and your ex would choose an independent appraiser for an accurate number from which to work. Appraisers can range anywhere from $700 to $1,000, but you can have those fees written into your divorce agreement. If you want to get a head-start on this, just look through websites like Zillow.com to get a quick and dirty valuation of your home or similar residences in your neighborhood.
Remember, too, that the value of your home may change if your divorce takes longer than expected – a common problem for couples these days, who are facing a slow-moving court system thanks to the pandemic. If you and your ex had the home appraised in late 2019, it may behoove you to have it reappraised now.
Think about your annual costs
Aside from your mortgage and taxes, what are the other costs of home ownership? Think about things like:
- HOA (for condos)
- Home repairs
- Yard maintenance
You should also have the home inspected by a professional to ensure there are no hidden problems or defects with things like the foundation or roof, which can be hugely expensive to repair or replace. Again, you might consider putting the costs of these repairs into your divorce agreement. With the unpredictability of a house, having a “rainy day fund” for unexpected emergency repairs is always a good idea as well.
Are you sure you can afford it?
After you calculate your monthly and annual expenses, compare it with your income and see how it matches up. Some people say a rule of thumb is that your mortgage plus taxes and insurance should not equal more than one-third of your income. When determining your post-divorce income, however, you can include alimony and child support (if you pay, you can deduct it from your income). Do keep in mind, though, that if your ex-spouse loses their job or becomes ill, you may not be able to count on that financial support.
Another thing to keep in mind is that in order to put the mortgage in your name, you may have to refinance the house, which can change the mortgage payment. Your family law attorney can tell you more after you’ve made the choice that’s right for you.
Think of all possible pitfalls
Sometimes it’s not as simple as just signing over a deed or refinancing the mortgage. Just as with purchasing a brand-new home, any number of surprises can occur during the process, and you should run proper reports and checks before finalizing your division of assets. For example, there may be problems with the title, errors in public records, or liens from back taxes that you had no idea about. A title search can allow you to identify these issues before making any agreements. Another common mistake couples make after divorce is forgetting to update their homeowner’s insurance policy, leading to denial of otherwise valid claims.
Consider other options
Some couples with children make an agreement to delay selling the house until the children are grown. Typically, one spouse moves out but continues helping make payments on the home. “In many cases, you can pre-agree to have the equity be split upon the sale of the home and let one spouse remain in the home especially if it is going to affect the kids,” says Ted Jenkin, a certified financial planner and co-CEO and founder of oXYGen Financial, a financial advisory firm.
Or, you could keep the family home and try nesting, which is when the children live in the house full-time and the parents take turns living in separate apartments. Lastly, if neither of you are attached to the house, you can simply sell it and split the profit. However, don’t forget that a home sale may have an impact on your taxes.
Ask yourself these questions
Following is a list of “gut-check” questions if you are thinking about keeping the family home in your divorce:
- Can I realistically afford this house? Is it an asset for me?
- Am I qualified for a mortgage? How much?
- Are there any liens or judgements against the title?
- Is the homeowner’s insurance up to date?
- Will the house be insurable in the future?
- Does the house have immediate necessary repairs?
- Will it need repairs in the future?
- Are the kids and I really attached to this house?
- Would it be easier and less expensive to move?
Of course, only you know the answers to these questions, but a qualified divorce attorney can help counsel you on your potential options.
At McCabe Russell, P.A., our Columbia divorce attorneys can walk you through every step of the divorce process, including asset division. Let us put our knowledge to work for you. Schedule a consultation with one of our attorneys by calling 443-917-3347 or reaching out to us through our contact form today. We maintain offices in Bethesda, Fulton, Columbia, and Rockville.