I mentioned before: when I got divorced it was critical that I keep the house. I had a lot going for me: my ex moved out, unannounced, I had a job and good credit, and I have custody of the kids. Plus we had a lot of equity in the home and mortgage rates have been at an all-time-low, so it wasn’t a huge financial stretch for me to refinance and buy him out.
Other women aren’t so fortunate. Even women who should know better. Just ask Deana Arnett, a certified financial planner with Rosenthal Wealth Management Group in Northern Virginia. This savvy money professional went through her own divorce a few years ago and walked away from the house she shared with her ex. “It was the worst move I ever made,” Arnett says. “It was a very emotional time and all I could think of was ending in a clean way without lawyers and fighting. In hindsight I realize I walked away from a lot of money that was rightfully mine.” Today she advises women to do better for themselves and their kids.
There are lots of reasons the woman — in most cases — should keep the house when she divorces.
Financial reasons include:
- Chances are, you will have less money when you divorce. If you’re forced to leave the home, you will likely move to smaller, less desirable digs.
- The home is the biggest financial asset for most couples. You walk away from that, you walk away from the bulk of your wealth — even if he buys you out. Why?
- Because historically, real estate has been a more stable investment when compared with stocks (recent years being an exception). Between 1978 and 2004, real estate appreciated an average of 8.6 percent per year. While stocks returned more than 13 percent during that time, they also saw more peaks and valleys. True, stocks grew more. HOWEVER, that is just appreciation — not including the wealth-building associated with paying off a mortgage, or the tax advantages.
- Because your household income will be lower, the tax write offs like mortgage interest and property taxes will be even more valuable post-divorce. Plus, if you were to sell your home, you can likely pocket most or all of the profits tax-free. Only a few investment vehicles provide such a tax perk.
- If you sell now in this down market, you will likely lose money on your investment. Hang on to it, and history tells us that you will recoup your investment — and then some. Remember investing 101 – buy low, sell high. Selling your home or hand it over to your spouse now is the equivalent of selling low, while refinancing or otherwise taking possession now equals buying low. Be a smart investor.
There are plenty of less tangible reasons why it is important for women to keep the home in a split.
The emotional reasons:
- Your home provides a measure of stability for you and your kids during a tumultuous time.
- Moving house might mean your children switch schools. See above.
- I believe there is something enormously comforting and empowering about home ownership — especially for women who tend to be the nurturer of the hearth, the nesters.
- For me, staying put meant being close to friends and neighbors who provided emotional and practical support during my split. It also meant that I stayed in a large apartment where I had a steady stream of overnight visitors who also lent much-appreciated support — including my mom who stayed with me for most of a year. These were critical elements of my story, which may not have been as positive without the real estate involved.
- How to File for Divorce (answers.com)
- Understanding Divorce (boston.cbslocal.com)
- Divorcing When Your Home Is Drowning in Debt (blogs.lawyers.com)
- TurboTax – Video: How to File Taxes for Divorcing Couples (turbotax.intuit.com)
- Six Must-Do Financial Steps for Women Preparing for Divorce (blogs.lawyers.com)
- What I Learned About Becoming Rich From Playing Cashflow (sophisticatedspender.com)
- Boomer Divorce Rate Skyrockets (video.foxbusiness.com)
- Uncontested Divorce Papers (answers.com)
- How Divorce Affects Your Credit – Reposted by JP & Tracy (recentlyseparatedwhatisnext.wordpress.com)
- Part 1: Screw up your credit, screw up your whole life. And your children’s lives. (wealthysinglemommy.com)