Couples planning to divorce have many important decisions that impact their lives for years to come. Except for custody and parenting plans, few decisions are more important than what to do with the home.
It’s typically one of your most valuable assets, but it is often a place of comfort, safety and continuity for the kids during this time of upheaval. It may also be in a community that provides support and friendship for the entire family.
Is keeping it the right decision?
The circumstance of each divorce is different. When it comes to the house, there are pros and cons. Some are financial, and some are emotional.
- Not all the memories will be good: It is hard to make a fresh start in an old house, mainly if there are too many reminders of the “bad old days.”
- It is not worth what you think: Property values continue to climb in Colorado, but a well-lived-in house may need a lot of work, including pricey infrastructural items like a new roof, a furnace or fixing a crumbling foundation. A fresh paint job can do wonders, but dated kitchens and bathrooms will lower the value.
- The overhead: Perhaps the couple is a dual-income family, which made the place affordable. The split now means two properties. The old place may have a hefty mortgage, high taxes or cost a fortune to heat and maintain. It can consume more money than the owner is willing or able to pay.
Options for keeping it
Many people have lists of reasons why it makes sense to keep it. Often the kids are resistant to moving away from friends, schools, sports teams, and activities. The parents may also realize that keeping it makes good financial sense because the mortgage rate is low or it is nearly or completely paid off. Parents may have an exit strategy where they keep the house for a few years until the kids are off to college or living on their own.
Crunching the numbers
Couples often have three options:
Sell it outright: This is a clean break that enables the couple to take that capital and put it down on something else that is theirs. It can also help with paying expenses like college. However, if the market is climbing steeply or the family faces capital gains thresholds. It may make sense to watch the market and sell at a better time.
One spouse pays the other: Paying a fair and equitable value split can often provide a substantial down payment for a new home to the spouse who moves out. There may be a future additional payment when it is time to sell.
Maintain joint ownership: If the value is dramatically increasing, it may make good financial sense to keep it and allow both spouses to benefit. However, it will impact both spouses’ credit ratings if the occupant does not make the payments.
Each situation is different
Each divorce is different, and one of the earliest and most essential discussions between clients and attorneys is determining what to do with the home. They can then work with the spouse to find a workable solution.