Avoiding Costly Housing Mistakes in the Midst of a Divorce
Divorce is a tough situation which opens up many emotional and financial issues to be solved. One of the most important decisions is what to do about the house.
You have 4 basic housing options when in the midst of a divorce:
❶ Sell the House Now and Divide Up the Proceeds –As you work to get your financial affairs in order, make sure you understand what your net proceeds after a sale will be - i.e. after all selling expenses. Then you can determine what your split of the proceeds will be. The split may not be 50/50, but rather may depend on the divorce settlement, the source of the original down payment and property laws in your area.
❷ Buy Out Your Spouse – This may require you meeting with a lender to determine how much you can afford based on your income and current debt. You will want to take into consideration the selling expense to arrive at a buyout amount.
❸Have 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 you will be liable for the mortgage. This liability may make qualifying for a new mortgage difficult for you if you decide to purchase a home.
❹ Retain Joint Ownership – If there is not enough equity you might consider retaining joint ownership for a period of time. While this temporary situation means you have no immediate worries in selling you will want to keep your eye on tax considerations which may change from the time of your divorce to the time of the sale.
If you and your spouse decide to sell your home, it’s important to work together through a professional to maximize your return. You will need to put differences aside. You both will need to sign a listing agreement, the contract and the all the closing documents.