Divorce: What You Need to Know About Your House, Your Mortgage and Taxes - Part 2

4 Options


You have 4 basic housing options when in the midst of a divorce:

1. Sell the house now and divide up the proceeds.


2. Buy out your spouse.


3. Have your spouse buy you out.


4. Retain your ownership.

It's important for you to understand the financial implications of each of these scenarios.


1. Sell the House Now and Divide Up the Proceeds.

Your primary consideration under these circumstances is to maximize your home's selling price. We can help you avoid the common mistakes most homeowners make which compromise this outcome. As you work to get your financial affairs in order, make sure you understand what your net proceeds will be - i.e. after selling expenses, and after determining what your split of the proceeds will be. Note that the split may not be 50/50, but rather may depend on the divorce settlement, the source of the original downpayment, and the legislative property laws in your area.


2. Buy Out Your Spouse.

If you intend to keep the house yourself, you'll have to determine how you'll continue to meet your monthly financial obligations, if you now only have one salary. If you used two incomes to qualify for the old loan, refinancing on your own might be a challenge.


3. Have Your Spouse Buy You Out.

If you are the one who is leaving, you have the opportunity to start again in new surroundings with cash in your pocket. However, be aware that if the old home loan is not refinanced, most lenders will consider both you and your spouse as original co-signers to be liable for the mortgage. This liability may make qualifying for a new mortgage difficult for you if you decide to purchase a home, even though you won't have legal ownership.


4. Retain Joint Ownership.

Some divorcing couples postpone a financial decision with respect to the home and retain joint ownership for a period of time even though only one spouse lives there. While this temporary situation means you have no immediate worries in this regard, keep your eye on tax considerations which may change from the time of your divorce to the time of the ultimate sale.

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