House and the Divorce
The house is usually the biggest asset of a married couple. Its where the two of you have lived and built dreams together. In many cases, you and your spouse have owned the house jointly, and you owe money on the mortgage jointly.
One of you will probably be moving out, and the other will decide to stay in the house. Who will continue making the payments?
A little further down the road, the one who stays in the house will need to sell or refinance the loan, but unfortunately that doesn’t happen right away. Divorcing couples can get creative with the arrangements they make with their house in a divorce. when I think I have seen every possible scenario; someone walks into my office, and they show me yet another way to do it. Here are some things you need to think about when you are making your arrangements.
I try to advise my clients that it is important that they do whatever it takes to get as untwined as much as they can, as quickly as they can. The house is vitally important.
Divorcing couples with kids and are tight on cash get really creative. Couples usually agree that they do not want kids to feel threatened by the divorce. They decide that one of them needs to stay in the house until the kids leave for college. Many agree to continue owning the house together for the sake of the kids. Deciding to sell after the kids leave and split the proceeds equally.
Imagine the one not living in the house doing drive byes, checking to see if yard is being taking care. Stressing over needed repairs and decline in value.
A new entanglement arises, the one that is not living in the house just realized that they may now owe capital gains taxes on the profit from the sale of the house.
The spouse who is living in the house begins to stress. They start focusing more on how thus arrangement will affect them financially. Since they have been living in the house for the past 6 years all the repairs and upkeep have been on them, having to share all the appreciation in the house value now does not seem fair.
If you and your spouse are talking about an arrangement that involves both remaining owners of the house for a long time into the future, on title or financially, A future where you share designated portions of the proceeds of a future sale, stop. Try and develop an arrangement that will untwine you from the house both legally and financially. This will give one less thing to stress over.
You decided that you want to stay in the house. The first thing I recommend is that you make sure you can afford the mortgage payments. I have learned that many divorcing couples make decisions based on emotions. Making decisions based on emotions can leave blindsided. Knowing what life after divorce looks like financially, is key. The best thing you can do for yourself is to develop a comprehensive budget before you lock yourself in to a divorce settlement. Understanding your financial situation will allow you to make decisions you can really live with.
Think through whether what you really want is simply to win the house, and whether you really want to live in it. More often than not, many insist throughout the negotiations of their divorce that they are going to keep the house. They strategic and offer many concessions to keep it.
It is sad to think that you may realize later that the house is not the same. It holds to many memories, or that you cannot afford the upkeep. To escape you decide to sell, But after all the concessions you made to keep it you have lost money.
If you find yourself standing strong for the house, take a moment to breath and step back. Take a moment to visit some potential properties available on the market. Can you picture yourself living somewhere else. Image your life a year after the divorce; your marriage is a memory. Can you see yourself entertaining your family and friends? Can you see yourself relaxing after a long hard day?
Know that your credit may be affected. If your name is on the mortgage the lender doesn’t care that you are no longer living in the home. If your spouse does not pay, they will come looking for you. When that happens, the lender isn’t interested who is living in the house or that your ex promised to make the payments; the lender just wants their money, and you’re still obligated to pay it.
Another situation is your debt-to-income ratio. The one living in the house may make all the house payments on time. But your name is still one the mortgage, so you still owe the balance of the house. This unpaid balance may make it difficult or impossible for you to borrow to buy another house or to make another large purchase until the balance is paid off or your name is removed from the loan entirely.
Capital gains tax is another obstacle. You risk losing your roll over option because now it is not your principal residence. All the profits may end up going to owed taxes.
As noted the marital home is usually the largest asset, Divorce lawyer, and financial advisors will need an appraisal for value. Your lawyer or financial advisor will probably have someone he or she prefers (who will render the kind of value you and your lawyer want to see and who makes a good witness). If you and your spouse are cooperative, that may not be necessary I recommend hiring a divorce rea estate professional they will provide an accurate value based on the current market in your area. and best of all it won’t cost you any money.
Having a knowledge professional who is engaged in the market, but also one who specializes in divorce real estate can help you determine true value. This will also provide you and your spouse the opportunity to speak with a professional real agent and ask questions about the house and the market. Get the knowledge you need if you decide to sell. Armed with this information, you and your spouse can agree on the value to use for the house in your negotiations.
The real estate professional will help you include the cost of selling such as (real estate commission, inspection, survey, etc.). this way you will have true picture of value.
Preparation is key. Knowing what documents, you need to have together is important. This is especially true when you and your spouse own a house or any real property.
- Mortgage Information
- 2nd Mortgage Information if applicable
- Improvements and Repairs
- Liens or judgement information
- Copy of the Deed/Title
- Home owners policy
Knowing how your title is held is also important. When one of you is conveying the house to the other, you have several choices available when it comes to the kind of deed you use. Many just do a quitclaim deed. Different Kinds of South Carolina Deeds/title people can use in divorce.