Divorce is normally very emotional and difficult situation to be in. No doubt about it. Sometimes when you are in the midst of this emotional upheaval you are asked to make decisions on the largest investment you've ever made.
First and foremost, try to stay focused. Seek out third parties to provide expert advice, whether legal, real estate, or financial. Once you know how a divorce affects your home, your mortgage and taxes, critical decisions are easier. Neutral, third party information can help you make logical, rather than emotional decisions.
Probably the first decision is whether or not to continue living in the house. Will the familiar surroundings bring you comfort and emotional security, or unpleasant memories?
Only you can answer these questions, but there will almost certainly be some financial repercussions to your decision process. A word of warning here though, you will not be able to purchase a new home and qualify for a mortgage unless you have a separation agreement in place with your spouse. This agreement will also assist in establishing what you will be able to afford. The purpose of this report is to help you ask the right questions so you can make informed decisions that will be right for your situation.
4 OPTIONS
You have 4 basic housing options when in the midst of 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.
It's important for you 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 after determining what your split of the proceeds will be. Note that the split may not be 50/50, but rather 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 now only have one salary. If you used two incomes to quality for the old loan, refinancing on your own might be a challenge.
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 with respect to the home and retain joint ownership for a period of time 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, call a real estate professional like Sherry and Patricia because it will be important to work together to maximize your return. Differences aside, you both need to 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 buy-out 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 both wish to use the same agent that sold your matrimonial home. The reason for this is simple, the agent will know the details of the sale which may affect the purchase of a home, i.e.: closing date, financial situation or how much you have from the equity of the home to put as a down payment on another home, your current needs, etc.
Sherry Downey and Patricia Simpson have helped countless couples through this difficult situation with unbiased service and empathy for the situation. Let us help.
Courtesy of:
Patricia Simpson, Broker
www.makeyourbestmove.ca
