Divorce: House, Mortgage, and Tax Essentials
Preventing Expensive Housing Mistakes During a Divorce
Divorce presents challenging emotional and financial issues, with a critical decision revolving around your home.
Amidst emotional turmoil, clarity is essential. Understanding how divorce affects your home, mortgage, and taxes can simplify decisions. Objective, third-party guidance can lead to rational choices.
Your first choice is whether to stay in the house, seeking comfort or starting fresh elsewhere. Your decision has financial implications—can you afford to maintain it? Is refinancing an option, or should you sell and purchase a more suitable home? This report aims to guide you in asking the necessary questions for informed decisions tailored to your circumstances.
4 Options
You have 4 basic housing options when in the midst of a divorce:
- Have your spouse buy you out.
- Retain your ownership.
It’s important for you to understand the financial implications of each of these scenarios.
- Have Your Spouse Buy You Out
If you are the one who is leaving, you have the opportunity to start again in new surroundings with cash in your pocket. However, be aware that if the old home loan is not refinanced, most lenders will consider both you and your spouse as original co-signers to be liable for the mortgage. This liability may make qualifying for a new mortgage difficult for you if you decide to purchase a home, even though you won’t have legal ownership.
- Retain Joint Ownership
Some divorcing couples postpone a financial decision with respect to the home and retain joint ownership for a period of time even though only one spouse lives there. While this temporary situation means you have no immediate worries in this regard, keep your eye on tax considerations which may change from the time of your divorce to the time of the ultimate sale.
When You Decide to Sell
If you and your spouse decide to sell your home, it will be important to work together through a professional to maximize your return. Differences aside, you both should be present when a listing contract is put together. Both of you should understand and sign this contract, and both should be active in the ultimate negotiations.
When You Buy Your Next Home
Use the proceeds from your previous home or buy-out to determine an affordable price range for your next home. Maintain a clear focus on getting the right home to suit your new situation. You may wish to review with an agent who offers a house-hunting service to help find a home that matches your new home-buying criteria… READ MORE…
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