By Massachusetts divorce lawyer and mediator Stephen McDonough of
The marital home is oftentimes a couple’s largest financial asset. Unfortunately, home values remain depressed and your real estate is also probably your largest expense.
Part of property settlement discussions surrounding a divorce whether you are in divorce mediation or having a litigated, court-based case, involves whether one spouse or the other – or neither – should stay in the house. Before agreeing to take over the house, also known as the marital home, do your homework and consider these helpful pointers:
- First, check your credit score. It’s a good practice to check your credit score periodically no matter what the circumstances. You can do it online fairly quickly. Actually, you could say that about a lot of things online I suppose. Most web-based services require a sign-up with a credit card and will automatically sign you up for the paid for service after thirty days or so. I suggest putting the date they will start charging you on your calendar so you don’t forget to shut off the service, if that is your preference.
- Once you determine your credit score, try to clean up anything you can on the report. Pay off or pay-down credit cards if you are able to. Check your report for any errors.
- Consider whether you want to take on yard maintenance and cleaning the gutters on your own in addition to the expenses of running the household. If you are not prepared to cut the lawn and rake the leaves and handle other maintenance issues, then make sure you understand what is involved from a labor and cost perspective before deciding to stay in the house.
- Look at the utility bills over a full year so that you are aware of what the electric bill looks like when the air conditioning is going full blast in August, or what the oil bills look like in January. It’s not pretty.
- Don’t overlook additional expenses that might (or will, and at the worst possible time) come up such as replacing a big-ticket item like the furnace or roof. Factor in these issues when you consider whether or not you can really afford to remain in the property.
- Once you determine that you really prefer to own the house after the divorce, you will need to look at refinancing the mortgage in your own name or look at assuming the loan. Either way, your soon-to-be-ex needs to be off the mortgage. This is where the reality of whether or not someone can actually afford to own the marital home alone sets in with many of our clients.
- Assuming the existing mortgage may be an option if you do not need to buy out your spouse’s share of the equity by refinancing. Some mortgage companies will allow you to assume the loan, some won’t. I always encourage clients to look in to this option as it may save on closing costs. You will still need to show enough income, as the lender is concerned with getting their money, and you are asking them to only have one person to go after instead of two.
- The spouse who is giving up their ownership interest will need to execute a quitclaim deed. If you are not sure about this process, you should consult your divorce attorney or a real estate attorney. Most attorneys will draft and/or record the quitclaim deed for a flat fee. The recording fees are set by the county.
- If you are the spouse who is giving up the house (hey, that rhymes), remember, even if you have moved out and are off the deed, if your name is still on the mortgage a late payment will affect your credit. I never recommend that the “moving-out spouse” stay on the mortgage if it can be avoided. If you have to stay on the mortgage while your spouse or ex-spouse is going through the refinancing process, I always put language in the separation agreement that the spouse who is responsible for paying the mortgage must notify the other if he or she is going to be late with their payments. That way the other spouse has the option of making the payment in order to protect their own credit rating. Other clauses in your divorce agreement can also help protect each person’s financial interests regarding the house.
- Be careful about being overly reliant on support payments to meet your basic budgetary needs. For example, if your ex is paying child support or alimony, and your ex should lose her or his job, then your support will most likely decrease as well. If your support should be cut in half for example, could you pay your bills? Does your soon to be former spouse have a good employment history? Does he or she have disability insurance?
- Taking a hard look at your court financial statement or other budget analysis can be helpful in putting together the facts and making a wise decision regarding taking over the house after a divorce. Don’t let emotions rule the day. Examine why you want to stay in the house. If you find yourself unable to crunch the numbers and figure out whether staying in the house is a good financial fit, your experienced divorce lawyer or mediator should be able to help you with this analysis. You could also consult a financial expert, such as a Certified Divorce Financial Analyst.
In reality, for many divorcing people, this issue is more complicated than reviewing a series of bullet points. Most of us identify with our homes, and during the stress and upheaval of a divorce the last thing we might want to do is leave our home, our neighbors, and what makes us feel comfortable and secure. Some parents may convince themselves that their children will be harmed if they need to move, although research tells us kids are pretty adaptable. Consider this question: If you are on edge every month about paying the mortgage or keeping up with maintenance, is that a good situation to? If you are super stressed, or have to take a 2nd job, think about how that will impact your children and your parenting.
Of course, some people are all for a fresh start and look forward to picking out a new place. If that is you, then the good news is that mortgage rates are still low if you want to buy. Remember that if you will be using income from child support or alimony to qualify for a new mortgage, that lenders want to see that you have been receiving the support payments for a minimum of three or four months, and frequently six months. You may also decide to rent. Perhaps your children are getting older and you might relocate in a couple of years or there is a job change on the horizon.
Whatever you decide, make sure you are deciding for the right reasons and that your choice is sustainable from an economic standpoint.
For more information, please visit our websites at:
Divorce & Family Law: www.DivorceCollaborative.com
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