One of the most common questions asked in a divorce is whether a client should keep or sell the marital home. Is this really that big of an issue? Yes, it is a very big issue as the decision to keep the marital home in a divorce could be one of the biggest financial mistakes made in the case. Too many times a client makes the decision to keep the marital home an emotional decision based on attachment or guilt. So, is keeping the marital home a big mistake?
Keeping the marital home can be a mistake
The marital home may be a source of cash for you to use after divorce. The cash equity received from the sale of the marital home can be used to pay off debt and have a fresh start. It can also be used for an emergency savings fund or an investment fund for retirement.
The marital home may be more home than you really need. Ask yourself if you really need all that square footage and whether the annual cost to maintain is worth it to you. Keep in mind that it’s not just the monthly mortgage; rather, it’s the insurance, taxes, utilities, lawn service, homeowner’s association dues, etc. Also, you need to consider the cost of major repairs, roof, siding, windows, air conditioning, pool, driveway, painting, etc. as these will inevitably come along and you would need to be prepared for such a major expense. Last, you should also consider if you have the time to be a homeowner. If you weren’t the spouse who handled all the repairs or the hiring of repair people and you are now both a single individual and a single parent, do you have the time necessary to maintain the house and yard?
Selling the home may be a good idea
Selling the home at divorce allows you and your former spouse to share the expenses incurred in getting the house ready for sale. It also allows you and your former spouse to share the realtor fees and closing costs incurred for the sale. For a $500,000 home, realtor fees at 7% would be $35,000.00 as a shared expense instead of one incurred by you alone if you sold the home later.
Selling the home at divorce also affords you the opportunity to avoid the expense of major repairs and ongoing maintenance costs. If you underestimated your budget or overestimated the amount of money you would have available to spend each month, you may not be financially able to pay for the repairs and maintenance needed. This could result in deferred maintenance that you will then incur at the time of sale as you will need to get the home ready before listing it for sale.
There are some good reasons to keep the marital home
Rent prices have greatly increased in the St. Louis metropolitan area over the past two years which may make renting more expensive than the cost of retaining the marital home. With mortgage rates being low, refinancing to buy your former spouse’s equity may result in a lower monthly payment if you had a mortgage with a high-interest rate. This is where it would make sense to discuss the monthly costs of retaining the marital home with an experienced mortgage lender and your attorney to look at the long-term implications of keeping the marital home versus renting versus buying a smaller home.
If you rely on your neighbors for childcare or simply as a support system for you and your children, then that cost needs to be considered when deciding to keep the marital home. The cost of childcare may be more expensive than simply staying in the marital home with a higher mortgage payment after buying out your former spouse’s marital equity. So, the neighborhood support system may be a financial benefit that results in you keeping the marital home.
We hope this post helps you understand whether you should keep or sell your marital home at divorce. Should you need the advice of a divorce and family law attorney or have questions or concerns about your situation, know that we are here to help and discuss those issues with you.