Divorce and Real Estate | What you need to know about Your House, Your Mortgage & Taxes

Friday, December 9, 2022   /   by Evelyn Lopes

Divorce and Real Estate | What you need to know about Your House, Your Mortgage & Taxes

Divorce and Real Estate 

What you need to know about Your House, Your Mortgage & Taxes


Divorce, if you or someone you know is going through a divorce, you know how emotional it can be. There are so many changes taking place and so many decisios to be made. It can be overwhelming!


Having neutral, third party information about how your home, mortgage and taxes are affected, can help you make critical decisions in a logical rather than an emotional manner, thereby making the overall process a little easier. 


While going through a divorce, one important factor centers around money.  As you seperate your assets, you are left with less than you had when you were together, and so it becomes increasingly important to avoid costly housing mistakes, so that you can maintain the most amount of equity as possible.


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


In the midst of the heavy emotional and financial turmoil, what you need most is some non-emotional, straight-forward, 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.

Divorce real estate is a process whereby the matrimonial home is sold and the equity is spilt. It is best if both parties going through the divorce can come to a mutual decison.  During this process the goal of both parties is to net the most amount of money from their real estate holdings. The more the parties fight over the outcome, the more money goes toward their legal and other professional bills, thereby decreasing the net amount of money left in their pockets.


While going through a divorce, Probably one of the first decisions is to determine whether you want to continue to 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 fresh, new start?


Only you can answer these questions, but there will almost certainly be some financial repercussions to your decision process. Think about 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? How much house can you buy on your new budget? Asking the right  questions will enable you to make informed decisions that will be right for your situation.


You essentially have 4 basic housing options when in the midst of a divorce. 


1. Sell the house now and divide up the proceeds.

2. Buy out your spouse.

3. Have your spouse buy you out.

4. Retain your ownership.

It's important for you to understand the financial implications of each of these scenarios.


1. Sell the House Now and Divide Up The Proceeds

 If you decide to sell the House Now and Divide Up the Proceeds

Your primary consideration under this circumstance is to maximize your home's selling price. We can help you avoid the common mistakes most homeowners make which comprOmise this outcome. As you work to get your financial affairs in order, make sure you understand what your net proceeds will be - that is how much money will you have after selling expenses, and after determining what your split of the proceeds will be. It is important to note that the split may not be 50/50, but rather may depend on the divorce settlement, the source of the original down payment, and the legislative property laws in your area.It would be best to seek legal counsel on these matters. If you need some suggestions, feel free to call us and we would be happy to provide you with some options.


2.Buy Out Your Spouse

If you intend to keep the house yourself and buy out your partner, you'll have to determine how you'll continue to meet your monthly financial obligations. Keep in mind that you will now only have one salary. If you used two incomes to qualify for the old loan, refinancing on your own might be a challenge.


3. Have Your Spouse Buy You Out

You may want to consider the option of having 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 the old home loan is not refinanced, most lenders will consider both you and your spouse as original co-signers to be liable for the mortgage. This liability may make qualifying for a new mortgage difficult for you, if you decide to purchase a home, even though you won't have legal ownership of the old one.


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


When You Decide to Sell

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 put together. Both of you should understand and sign this contract, and both should be active in the ultimate negotiations.


When You Buy Your Next Home

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 may wish to review with an realtor who offers a house-hunting service to help find a home that matches your new home buying criteria.


For a copy of our Divorce Real Estate Guide call us or visit www.DivorceInfo4RealEstate.com 

If you have questions, or would like to talk about your specific situation and your options, feel free to reach out. You can call me direct at 905-965-5902 or  you can scan the QR code below to set up a call. My name is Evelyn Lopes with The Evelyn Lopes Realty Team and iPro Realty Ltd Brokerage, and I'm here to help.

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