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3 options for your family home in divorce

Posted on in Divorce

A home is more than just a place to live. It's a place where memories are made. While some may see a standard kitchen, you see the place where your family gathered around for big Sunday morning breakfasts. And while others see the living room as a place to put the TV, you remember your son learning to sit up by pulling himself up along the furniture.

While these memories are certainly powerful, these memories alone should not be the reason for holding on to the family home after a divorce. Rather, you need to look at the big financial picture and do what makes the most sense for you and your family not only now, but also well into the future.

In this blog post, we will look at what some of the family home options are in divorce.

Option 1: Sell the family home
Buying a home is an investment. In fact, it may be the largest investment you ever make. A lot of time and thought - and paperwork - goes into buying a home. And while at the time of the signing, you and your spouse were no doubt excited, picturing living there for years to come, now that you are getting a divorce, you need to make a strategic decision on what to do with the family home.

For most people, selling and splitting the profits is what will make the most sense. While it can be emotionally hard to move from the home, this is the simplest and cleanest option for those with equity in their homes. With both of you no longer responsible for the family home, you can each get your own place that makes sense for your budget.

If you are in a situation where the equity is just not there, but you still want to sell, a short sale – where the lender agrees to take less than the value of the property – could be in your best interest. While this will impact your credit score, you can rebuild your credit and you would have the peace of mind of knowing all the loose ends of the family home are tied up after the divorce.

Option 2: Refinance the family home

While selling is preferable for most couples, if you or your spouse are in the financial position where one of you can take over the mortgage payments - and want to do this -refinancing may be an option, if you qualify for the mortgage on just your income.

What is important here is that under no circumstances should only one spouse be living in the home, while both are listed as owners on the mortgage. If your name is still on the mortgage, you are responsible if your ex misses mortgage payments - for any reason. Even if you and your ex get along now, none of us really knows what the future holds.

Would you be OK with your ex having a girlfriend or boyfriend move in? What if your ex loses their job or goes out on disability? If your name is on the mortgage, you are responsible for the mortgage payments, even if you are not living there or even if a quitclaim deed has been signed.

Option 3: Become landlords

If you do not have enough equity in the home - and are not comfortable with a short sale - another option for you and your ex is to rent out the home. This does not need to be a permanent solution, but is one you could do until enough time has passed that there is more equity in the home.

If you end up doing this, understand that you and your ex will be landlords together, which means even more responsibilities together. For many reasons, this is not a good fit for many divorced couples.

In the end, you want to make sure that you are approaching all options from a financial and strategic standpoint, and not just an emotional one. And while the choice you make may be a difficult one, it is important that no matter what you decide, anything mortgage related is settled before your divorce is finalized.

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