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I’m getting divorced. Should I keep the family home?

Divorce Image, March 2018

You’ve heard the stats: 1 out of every 2 marriages fails. Actually, I think the number of failed marriages is even higher now. Wait, let me rephrase that. A marital split is not a failure. I think that’s old-world thinking. A marital split is usually a positive move for all parties involved – for the spouses who are no longer in love and the kids who don’t have to see an unhappy married couple.

Marital splits can be a very emotional and difficult time in one’s life – especially when there are kids involved. There’s always one parent who wants to keep the house because the kids grew up there or have friends there or it’s just more familiar to them.

Having worked on 8,000+ mortgage applications at this stage in my career, I’ve witnessed my share of separations and divorces. I’m going to share what I’ve seen – a financial and personal perspective on marital splits.

What can you cut from your budget to make it work?

Trying to keep the house begins with good intentions. But the first obstacle is financial hardship. One must be able to support the mortgage and housing costs on their own. For many, doing this on just one income instead of two is difficult, if not impossible. You won’t be able to maintain your pre-divorce lifestyle. You’ll need to cut out something from your budget. Something has to give. Most of us won’t want to give up our kids’ activities or personal spending habits.

Now, let’s suppose you’re in a better financial position that allows you to afford keeping the family home. You want the kids to stay in the same home. You’re prepared to carry the full load on your own.

Your next step is determining what the house is worth…

The process of figuring out what the house is worth usually works like this: 1) You’ll want to get two appraisals from professional appraisers so you can use the average of the two values to determine a fair price. 2) Subtract any outstanding mortgage balance from your net equity in the home. Divide this by two and this is what you owe the other spouse (minus other normal costs associated with selling a house such as realtor commissions, lawyer fees, etc).

Seems logical, right? Well, when you’re dealing with such an emotional experience as divorce, sometimes logic goes out the window.

One spouse can often think the house is worth more or less, depending on how it affects them. This is usually a point of discussion, debate or, sometimes, when dishes and glasses get thrown across the room.

The goal of any divorce is to reach an amicable and fair solution – one that works for both parties… and that they can live with forever.

REALITY CHECK: IT’S EASIER TO SELL!

Bottom line… Most divorcing couples opt to sell the matrimonial home. I’d say 9 out of 10 will sell. It’s easier, both financially and emotionally. This is the best solution. You eliminate a topic for argument and let the market determine the home’s value.

Oh, what about the kids? Kids are resilient. They’ll move on. Chance are, this isn’t their first experience with divorce. They probably have a classmate or two who’ve already gone through this. They’ll be fine.

Talk to professionals…

I’d be happy to walk you through the steps involved in both buying out a spouse or buying a new home after splitting profits from the matrimonial home. I’m experienced with separation and divorce scenarios. Be sure that your real estate agent is as well, if you decide to sell the matrimonial home and buy a new one on your own.

There are specific things you must do in order to satisfy lender qualification rules in a separation/divorce situation regardless of which route you decide to embark upon… and it helps alleviate a lot of stress by working with professionals who’ve walked this road before with several other clients!

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.ca

Steve Garganis View All

As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.

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