As you work through your divorce, there are a variety of different options you might consider as you figure out what is the best thing to do with the house. We recommend you seek advice from your professional team, including your attorney, CPA and divorce counselor. Dividing property is challenging, and figuring out the house may be the toughest part to figure out.
Typical options include one of these:
This is more complicated than just saying “I get to stay” or “they get to stay”. If you have a mortgage on the house, anybody on the mortgage is responsible to make payments for the house. Remember, there is no divorcing the mortgage!
If you agree to have the other person stay after the divorce, it is incredibly important to get your own name removed from the mortgage. If you don’t, you’ll be responsible for the house payments (even if you don’t live there).
There are two traditional ways to remove yourself from the mortgage. The first is the easiest to do, but is seldom allowed. This is a process called “assuming the mortgage”. This means that the servicer of the mortgage allows one person to remove themselves from the mortgage, and let’s the other party assume all the responsibility for payments. Banks aren’t keen on this outcome because it might decrease the chance that they’ll get paid back, so it doesn’t happen as often. However, it’s definitely worth asking about! Contact your bank or mortgage servicing company and ask if they allow mortgage assumptions.
The second way to let the other person stay and to remove yourself from the mortgage is to “refinance” the property. This is a process where the other partner in the divorce will apply to the bank for a brand new mortgage. The bank or financial company will likely need to examine the value of the house, the credit score of the applicant, and whether they have the ability to pay back the bank. If one party wants to keep the house, and they have the ability and credit score to do so, this might be your best bet. Note, it will cost you a few thousand dollars to do this method.
Divorces are sticky and this option should probably be one of the last you consider. If you and your partner are unable to settle on one person or the other keeping the house, and you can’t sell it, you might be forced to rent it.
You can find a tenant who would like to live in your house, and pay monthly rent. This option allows you to bring in monthly income that can go toward paying off the mortgage, and hopefully putting yourself in a position to sell in the near future.
The dangers of renting the house out are that if you and your partner have a mortgage, you are both still obligated to pay back that money, regardless if you rent it out or not. You haven’t removed yourself from the problem, you’ve only delayed having to get rid of the house. Also, consider what it would be like to be a landlord. What happens if the tenant damages the property? Who is going to oversee repairs? Who will manage the property? Being a landlord can be a full time job, so approach this option with caution!
Selling the house in a divorce may be one of the best ways to remove yourself from the situation in a quick and painless way. When you sell the house, you’ll no longer have to decide who keeps it and no longer have to worry about the emotional connection you had to the property. With luck, you’ll even make some money when you sell it, and can walk away a little better off.
There are two common ways to sell a house when going through a divorce: you can list it with an agent or you can sell it quickly to an investor. Each have their own pros and cons.
Listing your house means you hire an agent to represent you in selling your property. When you list a house, you should be presenting a clean and livable house that somebody might look to buy and move into. You’ll need to make sure your house is presentable, show worthy, and any updates that are needed have been completed. Listing your house will be the best way to get the top dollar amount for it.
- Get your house sold
- Get top dollar amount for house
- Need to pay agent commission (usually around 6%, depending on location)
- Have house “ready for market”, including cleaned, updated, and ready for prospective buyers
- May take many weeks or months to sell
There are countless real estate investors who buy houses and can help in sticky situations like divorce. Investors buy less than perfect homes, and they will put money into them in order to fix them up to make them ready to sell.
They’ll be able to provide one of the easiest ways to sell your property because they often use cash, can close in a matter of days, and buy the property in ‘as-is’ condition (so you don’t have to fix it up or do any work to it). However, since they are investors, you probably won’t get quite as high an offer as you would if you listed the property.
- Sell in ‘as-is’ condition: avoid fixing or updating the house
- Close in a matter of days or weeks
- No agent commissions
- Simple and quick transaction
- You won’t get as much “bang for your buck” like you would if you list the house