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What to do with your assets is one of the biggest things you'll have to tackle during a divorce. Whether it's retirement accounts, artwork, or other valuables, one of the most high-ticket items you might have to consider divvying up is property.
One of the most formidable questions you'll face is whether to keep marital property or sell it. This question needs to be assessed on two fronts, the financial realities associated with taking on the property solo, and the emotional attachment you may have.
The last thing you want to do is make a commitment to taking on a high cost expenses post-divorce based only on feelings and not facts.
Here are 9 critical points to consider when evaluating if keeping a property after your split is a smart idea:
Emotional Attachment: Homes are more than bricks and mortar; they hold memories, making the decision emotionally charged. Divorce is a time of transition. Ask yourself the reasons you want to keep the property after a divorce. Are you holding on to the idea of security because you fear change?
Affordability: Can you bear the cost of maintaining the home on your own? This isn't just about mortgage payments but property taxes, insurance, maintenance, and more. As Alex Beattie wisely points out on The Divorce Planner's blog, safeguarding your finances and being prepared is vital when facing a life transition such as divorce.
Market Evaluation: Ask an expert. A CDRE can provide critical insights about the real estate market, property valuations, and the estimated selling time that can weigh in on your decision.
What Are The Hidden Costs of Property Ownership: You may think of your home as a stable asset, an investment that can grow with time. However, owning a property comes with its set of expenses that directly impact its net worth and your financial stability. Here's a peek into some of those costs: Mortgage Payments: This is an ongoing expense you'll need to bear if you decide to keep the property, which allows you to gradually own the property outright.
Property Taxes: These tax rates can vary by location, and substantial property taxes can make home ownership really expensive. Don't forget that they will go up every year, so plan for that in your budget.
Home Insurance: This is essential to protect your property from catastrophes, theft, and liability. The cost depends on factors like the home's value, location, and coverage type. Prices will vary year by year.
Maintenance and Repairs: One thing you can count on is emergencies popping up. Sinks clogging, roofs leaking and walls needing painting are just some of the maintenance costs associated with home ownership. Keep in mind that older homes tend to have high maintenance costs. Budgeting for these costs is critical to avoid significant future expenses.
HOA Fees: If your property is part of a Homeowner's Association, there can be monthly or yearly dues that cover shared community expenses.
Utility Bills: Don't forget the recurring costs due to utilities. You can expect to pay for electricity, heating/cooling, water, and possibly more.
Unpacking these often ignored, yet significant costs, financial planning is vital to avoid debt post-divorce, as emphasized by Alex Beattie in a recent interview with Alexa Rosario. You can find the video in the post Divorce & Your Property: The Essential Guide To Working With A CDRE.
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Financial Planning: Anticipate Future Costs So You Don't End Up In Debt Down The Line
Ideally, you want to emerge from a divorce financially sound, not swimming in debt. So, what does prudent financial planning entail? A start is to follow these tips:
Budgeting: An updated personal budget is a lifesaver. It catalogues your income and expenses, helping you identify discretionary income, manage expenses, and set financial goals. Want an easy-to-use monthly budget calculator that walks you through every possible housing expense you need to consider? Check out The Divorce Planner's monthly budget calculator.
Professional Help: Once you've done the groundwork and assessed your financial current financial realities, consider consulting with professionals such as a Certified Financial Planner (CFP), a Certified Divorce Real Estate expert (CDRE), or a Certified Divorce Lending Expert (CDLE). All three can can provide personalized strategies for handling real estate and other financial aspects during the divorce process.
Long-Term Planning: Your financial health doesn't end with the divorce settlement. Your budget should transition from survival mode to growth mode–involving saving, debt management, and investment.
Deciding To Keep or Sell Is Your Call, Make Your Decision Armed With The Facts
Whether you decide to keep or sell your property during a divorce can depend on many factors, including your personal desires, emotional attachments, financial readiness, and current real estate market conditions. Keep your financial goals front and center, consider the points above and consider seeking professional help when needed.
Your best course of action is to take the time to equip yourself with knowledge, tools, and a financial clarity before agreeing to take on large expenses in your life after divorce.
For more insights and guidance on what to do with property during divorce, check out the post, 4 Questions You Need To Answer Before Agreeing To Keep The Family Home.