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While the familial home may have sentimental value, from a financial standpoint, keeping the house is sometimes the wrong decision in a divorce. From payments that are too high to handle on a single income to buying out the other spouse’s interest, keeping the home may create several challenges that some individuals are best off avoiding. Understanding these challenges will help divorcing parties make informed decisions in the divorce process.
Payments Can Be too High
One reason for keeping the home in a divorce may not be wise is the cost of mortgage payments. Most couples purchase a home with the benefit of two incomes. The monthly mortgage payment is based on what they can afford as a couple. A divorced spouse with a single income may not be able to afford mortgage payments.
Refinance Is Necessary
Once the divorce is complete, the person who keeps the home may need to refinance it to buy out the other spouse. If the financial situation has changed significantly, refinancing may not be possible or monthly payments could be higher.
Determining Worth Is Not Easy
In Illinois, if one party keeps the house, the amount of equity in the home as of the date of the divorce must be split. The house will need to be appraised to determine its value. Yet placing a value on a house, unless it is actually on the market, is not always easy. Divorce lawyers often find this to be a serious point of contention in the proceedings. If the home were to be sold, however, the proceeds from the sale would be used to determine each spouse’s share.
Home Ownership Creates Additional Costs
Even if the party keeping the home decides the mortgage is manageable, there are other costs of owning a home. Maintenance, repairs, insurance, property taxes, and similar costs all add up, and the party considering keeping the house must consider these costs when making a decision. Again, changing to one income after the divorce process can limit how much the person can truly afford to spend on the home.
