Often times, the house is one of the biggest assets that any couple owns. So it can be one of the hardest to make decisions about, but it also can have a large impact on everyone’s life following the split.
Since the house is house is such a large asset and usually involves a mortgage (so a big portion of your credit score), it’s of the utmost importance that you work cooperatively through this piece of the separation. For as tough as it may be, keeping the negative emotions out of the picture will actually help you out in the long run. If you can get through this part of the divorce without a hiccup, you’ll come out the other side with the potential of having the same credit score and more money in your pocket.
When it comes to the property and divorce, there are two primary considerations:
- Emotions & The Family
- The Numbers & Mortgage
Emotions & The Family
Having these conversations will be very challenging, but you’ll get through the divorce much more smoothly if you contemplate and discuss these as you talk about what to do with the house:
- Do you have children?
- Are the children emotionally attached to the house?
- Will they have to change schools?
- If we eventually sell the house or move, what is the ideal age for the kids to be?
- Do you have fond memories of the house?
- Do you have bad memories from the house?
- Would it be emotional to walk into the same house after you’re separated?
- Is the property sentimental for any reason?
The Numbers & Mortgage
When you divorce your partner, you are legally separating from them. However, that doesn’t automatically mean you divorce yourself from the house and mortgage. Legal separation is a very different matter than separation from your house!
The state may say you are separated, but the bank says whoever is on the mortgage is liable to pay the bank back. There is no divorce from a mortgage…at least not until everything is paid back. So now what?
It’s very important that you know the numbers on your house before you decide what to do. If you’re at all contemplating having one partner keep the house, then do some math before you travel too far down that road. Add up the total of these expenses:
- Mortgage payment
- Both interest and principle paid every month
- Property taxes
- Any HOA fees
- Gas, electric, water and sewer
- Maintenance and upkeep costs
- Any other housing costs
How much does it take every month to keep the house “operational”? In other words, how much money do you absolutely need every month to pay for the house?
When you go through a divorce, you’ll divide up the property, and at the same time, you’ll each need to plan how you’ll pay for everything now that you’re separated. You might be stepping down from two incomes to just one. Or paying for living expenses from the divorce settlement. However you plan to pay for life after separation, make sure you know the baseline cost that you’ll spend every month in order to make ends meet.
If you can’t afford to pay for the house after the divorce, then you aren’t going to be able to keep the house. It might make the most sense for the other partner to keep the house or to sell it right away.
Know your financial position!