7 Points to Consider before Co-Owning the House After the Divorce
Updated: Dec 24, 2021
Following a divorce, it is not uncommon for both spouses to continue owning the family home
together for several reasons. In many cases, it’s for the kids. With life turned upside down, the home can remain a place of comfort, security, and stability for the children.
Additionally, it is often the case that one spouse cannot afford to buy the other out.
Divorce and your mortgage – What should you do with the house?
There are three common scenarios divorcing couples choose from.
There is no perfect answer. Like your divorce, it’s complicated, you’ll want to consult with an attorney and accountant to help determine the solution that is best for you.
The three most common options are:
1. Sell the home and divide the proceeds.
2. One spouse purchases the house and has the other party’s name removed.
3. One spouse stays in the house and relies on the other to make payments.
Let’s discuss #3 – The risks of keeping both parties on the mortgage.
1. You are both financially responsible for the entire mortgage.
A credit report will show the entire amount of the mortgage. The high debt on your credit may make it difficult to obtain credit for other purposes like a new car or another residence.
2. What happens if one of the spouses loses his/her job and can’t pay any portion of the mortgage, taxes and utilities. If the other spouse can’t make up the difference and the mortgage doesn’t get paid, both spouses’ credit will get screwed up, even though the spouse who didn’t lose his/her job did nothing wrong.
3. If the employed spouse does pay the entire bill, when and how does s/he get reimbursed?
4. Who’s responsible for maintaining the property? At some point, either after the kids graduate, or another reason, the home will likely be sold. Upkeep for resale is important.
5. Who will pay for the repairs if there is a roof leak, the furnace goes out, or the garage door doesn’t open?
6. Life changes. Three years down the road, the spouse not living in the house decides to get married. Does that spouse want that financial risk in their new marriage?
7. What happens if one of the spouses gets an IRS lien, files for bankruptcy, or dies?
Although the disadvantages of co-owning with your former spouse can be significant, there isn’t a one-size-fits all solution. Consider all the options and consult a financial advisor, attorney, and Certified Divorce Real Estate Expert™ to help you make the best decision for you and your family.