Divorce: Fighting for the marital home? 5 things to consider
Recently I represented Buyers in a transaction where a Seller wrote us the following in an email: “I purchased this home after I filed for divorce… I had no choice because I wanted to provide my daughter a comfortable home”. I felt very sad for the Seller as somehow she managed to convince herself that she had “no choice” but to spend $1.9M to make her daughter comfortable. She sold that home 5 years later to my Client for $1.645M and paid $80,000 in real estate commissions to boot.
I’m thinking her now 20 year old daughter is wondering why her mom felt she needed to live in such a large home. Did the Seller have a financial planner or did she choose not to listen? I’ll never know. But I do know I never want a Client of mine to be there. Knee-jerk reactions to divorce that include buying and selling homes should always be carefully and thoughtfully planned with the advice of professionals.
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Divorce: Fighting for the marital home? 5 things to consider
April 15, 2013 by Hannah Foxley
5 things to think about if you fight for the marital home
The upheaval and emotional turmoil of divorce means that decisions are often made in an emotional state rather than with a logical mind. Many women battle to hang on to the marital home because they feel that they don’t want further upheaval to themselves or their children but at what cost? I know of many horror stories of women who have held onto the marital home for dear life to their detriment. They have found that they are unable to afford to run the marital home on their own and then due to the economic situation have been unable to sell it for what it was valued at on divorce.
Here are 5 things to consider when deciding whether or not to fight for the marital home in the divorce settlement.
1. Can you afford to take on the mortgage?
A mortgage is a huge financial burden and having to pay it on your own without a second income can be too much of a financial strain. It may be that you are unable to get a mortgage due to your income being insufficient. If you are not earning enough to take on the mortgage and are receiving maintenance payments, this can be tricky to navigate. Some lenders will take account of the maintenance payments, some will not, some will want to see it being paid for three months, some for six months. Can you genuinely afford to take on such a huge burden? Your emotions may be telling you that you will manage but the reality is that you may find yourself scrimping and saving and depriving yourself and the children of any treats and holidays just to make ends meet. Is it really worth it?
2. Can you afford the upkeep?
There are on going costs associated with keeping a property. If you live in an older house, these are going to be particularly heavy on your purse strings. New heating systems, repairs to the outside and inside of the house, costs of maintaining the garden, the cost of redecoration and new furniture all add up. If you have stretched yourself to take on the property, you will struggle to keep up with these costs.
A client opted to keep a period house that had been lovingly restored by her and her husband. During the breakdown of the marriage she felt it was her haven. The divorce settlement took place in the height of the property boom and she gave up a lot of assets to keep the property, which was valued at over £800,000. She could afford the mortgage at the time on her salary. However, a couple of years later she was made redundant and was unemployed for 15 months, returning to a job that was only two thirds of her previous salary. The cost of running the home was far more than she had originally calculated and it needed costly work done to the roof, driveway and outhouses. After taking further lending to cover the cost of repairs to sell the house at it’s asking price of over £800,000, she was stretched beyond her limits and unable to sell the house. After unsuccessfully being able to sell the property for over two years, she is now being advised to accept an offer £150,000 below the asking price.
3. Long-term financial security
I believe that taking the house the house in lieu of the pension fund is a really risky strategy. The house that you live in is not going to provide you with an income in retirement unless you rent out all the rooms to lodgers or you significantly downsize and release equity. Your home is generally not an income generating asset, it is an asset that costs you money. Letting go of a pension fund, which will provide you with a future income because you don’t want to let go of the marital home could be a decision that you live to regret.
4. Moving on emotionally
You need to ask yourself the question is staying in the marital home with all of the old memories, feelings and emotions really going to help me to move on?’ It may feel familiar now in a time of great uncertainty but it will not help you to move on emotionally.
A client of mine told me that she agonized over moving out of the marital home and did not want to let go emotionally. As part of the divorce settlement, she bought herself a new flat outright and had it renovated just the way she wanted. She tells me that the day that she moved out of the marital home and into her new flat was so emotionally freeing that she felt like a huge weight had been lifted off her shoulders. She was able to move on much faster than she could while still living in a house full of memories and is now really happy and enjoying her new life.
5. Keeping the home for the children
You may feel that you need to keep the house for the sake of the children. You worry that moving house will be too unsettling for them. Children adapt amazingly well though and you can make moving house a fun adventure where you involve them in the process. It may be harder for them to move on emotionally by staying in the marital home.
I remember moving into a new house with my Mom as a child after her divorce. The first night we moved in, we had barely any furniture and her friends had helped her move. We sat on the floor in the front room eating fish and chips and everyone was laughing and happy and it is a really positive childhood memory, whereas the memories that I have from the marital home are not so positive as the atmosphere was heavy and sad.
Source: Hannah Foxley April 15, 2013 http://3plusinternational.com/tag/hannah-foxley/