Not sure what to do with your home now that you’re divorcing? Shawn Leamon answers your questions, originally featured on his website, DivorceAndYourMoney.com.
A house is generally one of the largest financial assets that you have, so it is important to know your options before you decide what to do with it. You could sell the house and pay off the mortgage, or one spouse or both spouses can keep the house. A quitclaim deed is also a possibility.
Selling your house is the simplest option. In this scenario, you would sell the house, pay off the mortgage, and split the proceeds. Selling the house while you are still married could save you an extra $250,000 in potential capital gains tax liability.
Your second option would be for one spouse keeps the house. It is one of the most common options, and if you are the one who will be keeping the house, you need to consider some very important points. Can you afford the house? Can you afford maintenance costs and mortgage payments? The sole owner of the house will need to refinance the mortgage. You will have to remove the name of your ex-spouse from the mortgage if you keep the house and have it refinanced, which has many advantages. Just make sure you know what to expect.
The third option is that both spouses can keep the house and rent it out. You can also consider a short sale. Depending upon your personal family situation,and whether nesting is an option for you, both of you could theoretically continue living in the house.
Another consideration is a quitclaim deed, which is a way to transfer your interest in a home to another person. You need to know and understand, what will happen to the mortgage before selecting this option.
Key Learning Points:
• A house is generally one of the largest financial assets.
• Know your options before you make a decision, which is either sell the house and pay off the mortgage or one or both spouses can keep the house.
• Selling your house is the simplest option.
• If you keep the house, make sure you know all the implications and get the mortgage refinanced.
• If both spouses agree to keep the house, they can rent it out, have a short sale, or continue living in it.
• If you sign a quitclaim deed, you should check the implications beforehand.
Shawn Leamon, MBA and a Certified Divorce Financial Analyst, discusses what happens to a mortgage during divorce. Leamon is the author of Divorce and Your Money: The No-Nonsense Guide