9F)Divorce - What You Need to Know About Your House, Your Home Loan, and Taxes During and After a Divorce
What You Need to Know About Your House, Your Home Loan, and Taxes During and After a Divorce
"Once you know how a divorce affects your home, mortgage, and taxes, critical decisions are easier. Neutral, third-party information can help you make logical, rather than emotional, decisions." Divorce is a challenging situation, which opens up many emotional and financial issues to be solved. One of the most critical decisions is what to do about the house. Amid the heavy emotional and financial turmoil, what you need most is some non-emotional, straightforward, specific answers. Critical decisions are easier once you know how a divorce affects your home, your mortgage, and taxes. Neutral, third-party information can help you make logical, rather than emotional, decisions. Probably the first decision is whether you want to continue to live in the house. Will the familiar surroundings bring comfort, emotional security, or unpleasant memories? Do you want to minimize change by staying where you are or selling your home and moving to a new place that offers a new start? Only you can answer these questions, but there will almost certainly be some financial repercussions to your decision process. What can you afford? Can you manage the old house on your new budget? Is refinancing possible? Or is it better to sell and buy? How much home can you buy on your new budget? This post aims to help you ask the right questions to make informed decisions that will be right for your situation. Four Options You have four basic housing options when amid a divorce:
1. Sell the house now and divide up the proceeds.
2. Buy out your spouse.
3. Have your spouse buy you out.
4. Retain your ownership.
You need to understand the financial implications of each of these scenarios.
1. Sell the House Now and Divide Up the Proceeds
Your primary consideration under these circumstances is to maximize your home's selling price. We can help you avoid the common mistakes most homeowners make which compromise this outcome. As you work to get your financial affairs in order, make sure you understand what your net proceeds will be - i.e., after selling expenses and determining your split of the proceeds. Note that the split may not be 50/50 but may depend on the divorce settlement, the source of the original down payment, and the legislative property laws in your area.
2. Buy Out Your Spouse
If you intend to keep the house yourself, you'll have to determine how you'll continue to meet your monthly financial obligations if you only have one salary. Refinancing on your own might be a challenge if you used two incomes to qualify for the old loan.
3. 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.
4. Retain Joint Ownership
Some divorcing couples postpone a financial decision concerning the home and retain joint ownership for a period 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, working together through a professional to maximize your return will be important. 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 buyout 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 you find a home that matches your new home-buying criteria. To help you establish fair market value and plan to move forward contact us today at 858-281-44659