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Divorce is a tough situation that opens up many emotional and financial issues that have to be solved. One of the most important decisions is what to do with the house.

In the midst of the heavy emotional and financial turmoil, what you need most is some non-emotional, straightforward, specific answers. 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 you want to continue living in the house. Will the familiar surroundings bring you comfort and emotional security or unpleasant memories? Do you want to minimize change by staying where you are or sell your home and move 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. 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 another home? How much house can you buy on your new budget?

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.

You have 4 housing options when in the midst of a divorce:

  • Sell the house now and divide up the proceeds
  • Buy out your spouse.
  • Have your spouse buy out you
  • Retain your ownership

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 that 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 it may depend on the divorce settlement, the source of the original down payment and the legislative property laws in your area.

Buy Out Your Spouse… If you intend to keep the house for 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 qualify for the original mortgage, re-financing on your own might be a challenge.

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 re-financed, most lenders will consider both you and your spouse as original co-signers who are liable for the mortgage. This liability may make qualifying for a new mortgage difficult if you decide to purchase a home, even though you won’t have legal ownership of the previous home.

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 in the home. While this temporary situation means you have no immediate worries in this regard, keep your eye on tax considerations that may change from the time of your divorce to the time of the ultimate sale

If you and your spouse decide to sell your home, it will be important to work together through a professional to maximize your return. Differences aside, you both should be present when a listing contract is completed. Both of you should understand and sign this contract, and both should be active in the ultimate negotiations.

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 might wish to review housing options with a real estate salesperson that offers a house-hunting service to help find a home that matches your new home-buying criteria.

This report is for information purposes only. It is not intended to replace individualized legal advice. It is recommended that you seek professional legal counsel for your legal issues.

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