How Divorce Affects Your Home, Your Mortgage, and Your Taxes

When you understand how divorce affects your home, mortgage, and taxes, making critical decisions is easier. Neutral third party information will help you make logical, instead of emotional, decisions.

Avoiding Costly Housing Mistakes in the Midst of a Divorce

Divorce is a difficult situation that usually involves many emotional and financial issues that need to be resolved. One of the most important issues is what to do about the house.

When you’re involved in heavy emotional and financial turmoil, you need some non-emotional, straight-forward, and specific answers. With a solid understanding of how divorce affects your home, your mortgage, and your taxes, making critical decisions will be easier. Seek out neutral, third party information to help you make logical, rather than emotional, decisions.

Your first decision will probably be whether you want to continue living in the house. Ask yourself if the familiar surroundings will bring you comfort and emotional security, or unpleasant memories. You might want to minimize change by staying where you are, or sell your home and move to a new place and a new start.

No one can answer these questions for you, but there will almost certainly be financial repercussions to your decision. Determine what you can afford, and whether or not you can manage the old house on your new budget. Is refinancing possible? Or is it better to sell the existing home and buy something else? Figure out how much house you’ll be able to buy on your new budget. This report is intended to help you ask the right questions so you can make informed decisions that are right for your changing situation.

Your 4 Housing Options.

When you are in the midst of a divorce, you have four basic housing options:

1. Sell the house now and divide the proceeds.
2. Buy out your spouse’s share.
3. Invite your spouse to buy your portion.
4. Retain your ownership.

It’s important that you understand the financial implications of each scenario.

1. Sell the house and divide the proceeds.
2. In this scenario, your primary consideration in these circumstances is to maximize the selling price of the home. We can help you avoid common mistakes made by most homeowners that can compromise the outcome. As you work to put your financial affairs in order, it’s important that you understand what your net proceeds will be; i.e., your split of the proceeds after selling expenses are considered. Note that the split won’t necessarily
3. be 50/50, but may depend on the terms of the divorce settlement, the source of the down payment, and local legislative property laws.
   1. Buy your spouse’s share.
   2. If you plan to keep the house, determine exactly how you will be able to continue to meet your monthly financial obligations, since you’ll probably have only one salary. If both your spouse’s and your incomes were used to qualify for the original loan, refinancing on your own might be challenging.

3.  Let your spouse buy your share.

1. If you are planning to leave, you may have an opportunity to start fresh, in new surroundings, with some cash in your pocket. But you must be aware that if the original home loan isn’t refinanced, lenders will usually consider both you and your spouse, the original co-signers, liable for the mortgage. This liability could make it difficult for you to qualify for a new mortgage if you want to purchase a home, even though you don’t have legal ownership of the existing home.

4.  Retain joint ownership of the property.

1. Divorcing couples sometime postpone financial decisions regarding disposition of their home and retain joint ownership for a while, even though only one spouse lives there. While this temporary situation means you have no immediate worries about how to deal with the home, keep in mind that tax considerations may change from the time of your divorce until the sale of the home.

When You Decide to Sell the Home.

If you and your spouse decide to sell your home, it’s important that you work together through a professional to maximize your return. You should both be present when the listing contract is put together. Both of you need to understand and sign the contract, and both should participate actively in the final negotiations.

When You’re Ready To Buy Your Next Home.

Use the proceeds from the sale of your previous home or a buy-out to calculate an affordable price range for your next home purchase. Stay focused on getting the right home for your new situation. To simplify the home search, consider contacting an agent who offers a house-hunting service to help you find a home that’s just right for your new home buying criteria. 

Divorce is often the source of new complications in an already complicated situation. We’ve offered some options for dealing with the question of what to do with your home. A good agent can help you understand how each idea might impact your financial situation after the divorce is final, and help you find a new home when you’re ready to do so. We have many similar reports, and they are all available to you at absolutely no cost.

Please call us to schedule a free consultation if we can help you or your friends understand the options available when you divorce, or help you buy or sell a home under happier circumstances. We’ll meet with you for about half an hour and show you the latest home-buying technologies and strategies. No high pressure; just plain, honest talk. Your consultation is completely free and does not obligate you in any way.

We look forward to hearing from you soon! 

Warmest regards,

Neville & Damali Adomi

Phone:     (604) 467-4420

Email:       info@AdomiTeam.com