In the United States, there are about 277 divorces per hour, which equal about over 2 million divorces per year.
Since over 64.1 percent of Americans are homeowners, it’s safe to say many of the couples going through a divorce own a home together.
If you’re wondering what happens to the house in the event of a divorce, this article is for you. Read on to learn why selling your house during divorce is a good idea.
1. You Cannot Afford the Payments
Although you might be tempted to keep your house during the divorce, you have to think about whether or not you can afford the payments. Most things are easier when you’re dealing with two incomes.
Keep in mind when you own a house, you have to pay for more than the mortgage. Home ownership requires you to pay for insurance, taxes, utilities, and repairs.
If paying for the house expenses equals more than one-third of the price of the home, you might not be able to afford much else. When all of your money goes into paying for the house, it might not leave you money for groceries, entertainment, and savings.
Don’t rely on what you might get in child support to take care of the house costs. Remember, child support only lasts until your child turns 18.
If you’re on the fence about selling the house, make sure you won’t sacrifice your well being.
2. You Have to Pay More in Interest
If you’re planning on buying out your spouse, you may have to take many things into consideration. On top of paying for the interest of the refinanced new loan, you will have to pay for the equity their half of the house has accumulated. This means your new refinanced loan may be more than the original loan you both took out.
When you sell the home, on the other hand, you can split the equity equally.
Equity refers to the value of the house you own. For example, if you purchase the home for $300,000 and you have already paid $150,000 on the loan, then you and your spouse have $150,000 worth of equity.
If you see the home during the divorce, both of you can split the equity.
In these situations, you take into account the closing costs before you calculate your share of the equity. This means the costs will be split in two.
If you wait until you sell the house on your own, you will have to pay for the closing costs all by yourself. Also, it’s important to keep in mind the law of your state where you reside. Some states have specific tax laws in regards to the closing costs.
3. Think About All the Other Costs
As we mentioned earlier, you will have to pay for the mortgage, taxes, and insurance on the home. However, these are not all the costs you will have to pay for when you’re a homeowner.
Sure, if you are a renter, you will also have to pay for groceries and utilities. However, there are a few costs that are specific to homeowners.
When you have a newer house, you might not face some issues until further down the road. With an older home, you might have more bumps on the road.
You should take a good look at your finances and see if you can afford to pay for big repairs if something goes wrong with your house. Some of the most expensive home repairs include replacing the roof, appliances, HVAC system and others.
Those who own a condo or a townhouse also have to pay for homeowner’s association fees which can be quite steep depending on the place.
4. If You Sell You Will Know the Value of the House
On top of everything that is at stake during a divorce, the value of the home is a big one.
If one of the parties wants to keep the house, there might be conflict when it comes to deciding what the real value of the home is.
For example, the spouse who wants to keep the house might say that the home is worth a lot less than it actually is. This would mean they have to pay less money to buy their spouse out.
If the other spouse wants to sell the house and split the profits, it’s in their best interest if the house is worth more.
No matter if you want to buy or keep the house, the only way to get the exact value of the home if by selling it.
Although appraisals get pretty close, these are only estimates.
5. You Cannot Predict the Future
When it comes to real estate, no one can predict the future. If it’s a seller’s market when you’re going through the divorce, it doesn’t mean the market will stay the same.
There’s no guarantee the real estate market will stay in your favor when you decide to sell down the road.
6. Only Keep if You Can Refinance
During a divorce, you will want to take the name of your spouse off of everything you own. If your spouse’s name is on the mortgage, your best bet is to refinance if you choose to keep the house.
However, you should note if you refinance, you may or may not have to pay for a higher interest rate.
7. Consider the Pros and Cons of Selling
Aside from considering all of the financial aspects, you also need to consider the personal pros and cons.
If you have kids, it might be in their best interest to stay in the only house they know near their school and friends.
Conversely, selling the home might also mean a fresh start for the whole family.
Selling Your House During Divorce: The Bottom Line
If you’re thinking about selling your house during divorce, you should consider all of the financial aspects. Don’t keep your house if you won’t be able to afford the payments.
However, you also have to keep in mind other things such as refinancing and the real estate market.
Are you in a hurry to sell your home? Check out these 8 tips for selling your home quickly.