Staying home after divorce may be affordable

Deciding whether to keep the family home is one of the most difficult and emotional decisions during divorce. For a long-time, keeping the marital home was not recommended and considered as being financially risky. But staying home may be more affordable in a typical or high-asset divorce.

Courts typically awarded exclusive use and occupancy of the martial residence to the primary parent during the divorce process. This spouse is usually the children’s mother. Even though this cemented emotional ties to their home, the recommended course of action was to sell the home and divide the sale proceeds between the spouses.

In the past, high real estate prices made keeping the home unaffordable because purchasing the other spouse’s equity was expensive. But falling prices and interest rates have made purchasing the house more affordable.

Financial action plan

Getting the lowest price for purchasing the other spouse’s share in the house requires some pencil sharpening and putting emotions aside. The first important step is to obtain a professional real estate appraisal to get the correct value.

Next, you should figure out whether you can handle the home’s monthly costs. These include real estate taxes, maintenance, utilities, insurance. Paying off all the high-interest debt, having an adequate emergency fund and building up retirement accounts are also required. Future financial needs, such as retirement and college, should also be considered.

While mortgage rates are very low, getting a mortgage may be difficult for one spouse. This is especially challenging for the spouse who is the non-earning spouse whose income relies upon spousal and child support payments. Some lending companies, however, have products for borrowers who have limited income but considerable assets.

Is it worth it?

Real estate is generally a wise investment and an opportunity for diversification, even with the recent decline in home prices. If the home’s value increases, there are special tax advantages when it is sold. Homeowners in this county generally have a higher net worth than renters.

Real estate, however, should constitute no more than 30% of an investment portfolio. This helps assure that there are enough liquid assets to pay for other living expenses and that assets are adequately diversified.

An attorney can help decide whether continued home ownership is feasible and other property division issues. They can also seek a fair and reasonable decree.