Nine reasons why keeping the home is a mistake:
Keeping the marital home in divorce can be one of the biggest financial mistakes made in divorce. Many divorced Moms have told me they regret keeping the marital home. They admitted that their reasons were emotional (e.g. guilt about uprooting the kids or emotional attachment to the home itself). They figured out too late that the kids would rather have a happy parent than a financially stressed out parent. Why can keeping the marital home be such a big mistake? Here are nine good reasons:
- The cash on a home sale can be used to pay off debt and have a fresh start.
- It’s too big. On top of the mortgage, there is more to insure, tax, heat and cool and often a bigger yard to maintain. More square feet mean more potential for repairs, more roof to replace, more siding and windows to maintain and paint, etc..
- It’s a time burden. Often the spouse’s shared home maintenance chores. Many women left the exterior maintenance to the husband. Also, being a single parent leaves less time to care for the home.
- Even if the intent is to sell the house once the kids graduate high school or college, you will have missed the opportunity at the time of divorce to split the costs of the home sale. For a $400,000 home, that is a loss of $14,000-$16,000 (one half of 7-8% in closing costs).
- The financial strain may exceed the perceived emotional security from keeping the house.
- You will be trading cash, which can be invested for retirement, for an asset that is a money drain.
- The house may end up with deferred maintenance that does not get addressed because of lack of funds. This is especially true for homes where big ticket items (such as the roof or HVAC) are nearing the end of their life cycle. You can get stuck with a house that is both unsellable and unaffordable.
- It’s not worth keeping a big house for the occasional visit from the kids and grand kids. If your couch or air mattresses won’t suffice or if you really don’t have the room, you can always offer to pay for or chip in on hotel rooms. After all, they are coming to see you, not the house.
- It can leave you stuck in the past.
There are some reasons to keep the marital home:
- Renting is more expensive than owning in Wilmington (where I live) and maybe where you live too. Current home costs, even for a smaller home, may result in a higher mortgage payment than an existing larger home. However, there are still those other costs which may be higher. This is where a Certified Divorce Financial Analyst can help look at the long term implications of keeping a home vs renting vs buying a more modest home.
- You may not have good credit or credit history to qualify for a mortgage.
- You may have a support system in the neighborhood that you would lose should you move from the home. Nearby family or neighbors may provide emotional support and sometimes financial support, in terms of child care or assistance with home maintenance. Studies have shown that a good support system actually has financial benefits as people can move forward in their lives more quickly.
A CDFA will help you analyse the pros and cons of divorce decisions
Many of my new clients tell me they believe they are entitled to maintain a lifestyle they are accustomed to when, in reality, neither party can afford the lifestyle they are accustomed to. Shifting a divorcing person’s mindset to the new financial realities, including where they can afford to live, is one of my toughest but most valuable tasks. I hope this blog helps you understand whether it’s wise for you to keeping your marital home.