Should I Keep the House?

Home Divorce can shake you to your very foundations. Everything changes, and many people want to cling to the house as the only stability they find in a shifting world. Whether keeping the house is your best option depends on many different factors. Here are what you need to consider in making that important decision.

1. What does the house represent to you? 

Home is a refuge from the world, and for many, it is an extension of themselves and their lives. It is the place the children grew up, where you spent happier days, an embodiment of what your marriage should have been. But are those good reasons to keep the home?

Make a list of each of the benefits of living in the house, then for each one ask yourself what feeling that gives you, and where else could you live to get a similar feeing? For example, I like the fact that my house is set off from the street. It makes me feel safe and feeds my privacy. But I guess I could feel safe in a gated community. And I could feel privacy if I had shutters on the windows, or even thick drapes. Bit by bit, this exercise will help you identify what is important to you and open up to possibilities other than keeping the house.

2. If you keep the house, how long will you live there?

If you plan to keep the house forever, then asking for it in the divorce makes more sense than if you plan to live there for just a couple of years until the kids are grown and gone. Refinancing the mortgage to get your spouse’s name off the loan is costly, and so are the costs of sale when you sell it. Over a short period of time, those expenses are likely to exceed the appreciation of the home, and you will lose money by keeping the house. But if you have many years of appreciation ahead of you, keeping the house might justify the costs to acquire it in the divorce and sell it later on.

3. Does continuing to hold it jointly with my ex make sense?

If you intend to keep the house for just a few years, continuing to hold it jointly with your soon-to-be-ex might make sense. That way you don’t have to refinance to get his name off the mortgage and pay him his share of the equity, nor do you have to trade valuable assets such as retirement accounts for his equity. You can keep your same comfortable mortgage payments, you won’t have to pay costly refinancing expenses or 100% of the cost of sale when you sell, and you will both share in the appreciation.

4. What will you have to give up to keep it?

You may be tempted to trade retirement assets for his equity in the house, but before you do, ask yourself whether you’ll be able reconstruct those retirement assets between now and retirement. Retirement planning in divorce is difficult, because you are already giving up half the retirement in the divorce. Can you afford to give up even more to keep the house?  If your answer is yes, you’ll give up anything to keep the house, realize that you’ll still end up having to sell it when the support runs out and you need funds to retire. By keeping it now, you may only be postponing the inevitable.

5. Can you afford the mortgage payments and home upkeep?

You may be charmed by a low mortgage payment, but once you refinance at today’s interest rates to borrow funds to pay him off and get his name off the mortgage, you may not find your monthly payment quite so charming. You’ll also need to consider the regular maintenance that the house requires, as well as any deferred maintenance that has gone by the wayside as the marriage deteriorated. Buying him out of a home that is falling down around you may turn out to be a disastrous decision.

6. Are you signing up for hidden tax consequences if you keep the house?

You can exclude up to $250,000 of capital gains when you sell your home if you’ve lived there for two of the five years before sale. If you and your spouse sell the home jointly, together you can exclude up to $500,000 of gain. But once you become the sole owner of the house, when you sell it, the entire cost of sale and capital gains liability will be yours alone. If the gain exceeds $250,000 you will have to pay tax on the excess, even though your combined $500,000 exclusion might have saved you from paying taxes. So if your home has gone up significantly in value over the years, you might be better off selling it while it is in both names.

Comments

  1. What if I can’t afford the house on my own, but can’t leave because of my kids. If I keep it and fix it up? Or just let him have it and find my own cheaper place

  2. I know of parents who keep the home while renting an apartment. When one spouse has the kids, the other is in the apartment. The parents move back and forth, not the children.

  3. He left four years ago to work abroad and have affairs. He has paid the mortgage monthly since we bought the home jointly 10 years ago. I need the home to live I due to fighting cancer and it being near treatment facilities.
    He is now telling me I need to pay the entire mortgage monthly because he is moving and needs more money to pay for housing in Europe.
    What do I do?

  4. My husband left three years ago and is continuing to pay the mortgage but I want to sell it so I can move but he doesn’t. He doesn’t have enough money to buy me out or the credit to refinance it on his own. The house is in both of our names and I can’t afford an attorney but I also can’t afford to find another place without selling this house first. If I file on my own requesting that we sell our house and he contests, can I then hire attorney even if my papers of already been filed ?

    • If he can’t buy you out, and you don’t want the house, then a judge will order it sold. But a judge can’t do that until you file and request a court hearing. You can always hire an attorney, at any time after you file. Everyone is entitled to representation.

  5. My husband told me 2weks ago he wants divorce. We face hard times during the recession He was lost a great paying job in 2008 and I was laid off in 2010. He was able to pick up sales positions only to be terminated within a short amount of time. When I was laid off I had to make a decision about pulling down my pension to pay bills. I also used it to buy a few large screen TV .Since then he drinks a six pack w/pot nitely. I have tried to hang in there with him because I love him but it brakes my heart that after my investing my pension he no longer wants to be married to me. It will be15 years married in a few month. We don’t have children his oldest is 29yrs and the youngest is 20yrs. In 2011 my husband wasn’t getting along well with his manager so he quit his job. I don’t think he thought of the consequences because I ended up having all of my tax refunds since then taken for child support. We have a great house that I found picked out an have invested every penny into. My husband told me that this was his last summer in the house. I want to keep the house. It wont be so easy because I just bought a new car that i’ll have to sell, but it is doable. I have about 15 more years to work before retirement and I have started paying back the pension I pulled down. I would suggest to my husband that I can pay the mortgage and stay in the house, but he’s trifflin. and I don’t want after having divorced him to find that he had an affair with children on the way with a new obligation. I don’t have children and would like to become a foster parent. What should I do?

    • Talk to an attorney right away about your options in divorce. If you are trying to stay married (it’s hard to tell from your post) then you can suggest that he and you try marriage counseling, but if he won’t do that, then it sounds like you will be getting divorced. So find out from an attorney what you can expect so you are prepared.

  6. My husband wants me to keep the house. My income alone will cover the mortgage, but will barely cover all living expenses so i can rent out a room. Im concerned with current interest rates, although still low, will be increasing and what interest rate, or loan id qualify for just based on my income, which gross is apx 3x mortgage, not including taxes and insurance. Selling it would probably mean giving up half the profits let alone any chance of coming back. Were doing a legal separation or suspended divorce first.

    • Talk to your bank or a mortgage broker to find out what loan you’d qualify for based on your income. Then decide what you should do based on your situation. Your husband doesn’t have the right to make decisions for you that aren’t in your best interest.

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