Key Takeaways
- Divorce creates emotional and financial strain, making major decisions challenging.
- Before you agree to keep the house, consider expenses such as mortgage, property taxes, home insurance, utilities, and maintenance costs.
- List major repairs and unexpected expenses to understand the long-term financial commitments.
- Evaluate if you can realistically afford to keep the house while minimizing financial stress post-divorce.
- Make informed financial decisions about your home before signing your divorce agreement.
Estimated reading time: 6 minutes
Going through a divorce is exhausting.
You’re making major financial decisions while being emotionally drained.
You’re also juggling your regular daily obligations, including work.
One of the most significant financial assets you’ll be considering is your house.
But before you agree to keep your house as part of your divorce settlement, review the following items.
1- Mortgage pre-approval:
This step will ensure you can refinance your house in your name.
The pre-approval process is more detailed and reliable than being pre-qualified.
If you keep your house, your settlement will require you to take your ex-spouse’s name off the mortgage.
To do that task, you’ll need to refinance your home loan.
If you don’t have earned income or don’t make sufficient money, you may not qualify for a mortgage on your house.
It’s better to find out this information BEFORE you sign your divorce settlement.
2- Property taxes:
Find out how much your property taxes are and the due date.
Some cities have an additional tax.
Also, you may qualify for the homestead exemption.
Once you know how much your property taxes will be, check your finances to ensure you can afford it.
If you’re escrowing, estimate how much you will owe at closing (that’s where knowing the due date will come in handy).
3- Home insurance:
Calculate how much home insurance you will need.
Depending on your property, you may need an umbrella policy (e.g., if you own a pool).
Depending on your property location, you may need additional coverage (e.g., flood).
Verify you can afford this expense because coverage is required for your mortgage.
4- Regular utilities and maintenance:
List all utilities and regular maintenance expenses.
Remember to include quarterly and annual expenses (e.g., pest control, HVAC service).
Based on your income, determine if you can afford these expenses.
You may have to give up some personal non-essential spending to keep your house.
5- Major repairs and replacements:
Create a list of upcoming major repairs (e.g., exterior paint, deck maintenance) and replacements (e.g., roof, water heater, air conditioning).
On the list, add a cost estimate and timeframe (e.g., in one year, two years, etc.) for each item.
While you don’t need to pay for these items now, you want to be aware of how much they will cost so you can save for these future expenses.
6- Unexpected repairs:
For those unexpected repairs, you’ll need money to pay for them or at least cover your home insurance deductible.
Ideally, target an emergency reserve equal to at least 9 to 12 months of your essential expenses.
Part of the divorce process is making major financial decisions.
While it’s normal to want to keep your existing house, especially if your children are young, it may not be a wise financial decision.
Click HERE to learn about our “Pre-Divorce Financial Review.”
Going through the items above will help you decide whether you can realistically afford to keep your house.
And remember, you can make any house a “home” – even if it has less square footage.
Strive to minimize financial stress in your new post-divorce life.
Make the tough decision before you sign your divorce agreement.
(Update to original post from August 6, 2024)
ABOUT THE AUTHOR:
Niv Persaud, CFP®, is the Founder of Transition Planning & Guidance, LLC (TransitionPG®). She believes life is more than accumulating money – it’s about living the lifestyle you envision and can afford. Niv incorporates all aspects of life when discussing money. She developed the 5 P’s of Life (Personal Relationships, Personal Finance, Profession, Peace of Mind, and Physical Health) to help clients define what they want from life. Once she understands their vision, she helps them achieve their lifestyle or adjust their expectations based on their finances. Niv actively gives back to the community through her volunteer efforts. She believes in living life to the fullest by cherishing friendships, exploring the world, and laughing often—even at herself. Her favorite quote is by Erma Bombeck, “When I stand before God at the end of my life, I would hope that I would not have a single bit of talent left and could say ‘I used everything you gave me.’” Click HERE to read where she’s been quoted in the media.
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