Should you keep the house in divorce? What to do if you want the house

single mom buy home

When I got divorced I kept the house. I had a lot going for me: my ex moved out, unannounced (which left me legally entitled to it), I had a job and good credit. 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. I wanted to stay, I wanted to keep the house in my name, and so when we divorced I refinanced it in a cash-out refinance, gave him a chunk of cash and called it a day.

This was the right decision for me.

But this isn't true for all women. Deana Arnett, a certified financial planner with Rosenthal Wealth Management Group in Northern Virginia. This 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 pros and cons to keeping the house in the divorce. Which is right for you?

First, understand what you are entitled to in your divorce when it comes to dividing property.

Reasons to keep the house in your divorce:

  • You can afford it easily on your own. This means that after any refinance, buy-out, you can easily afford monthly mortgage payments, taxes, insurance and upkeep on your own income. If you require alimony or child support to stay in the address, that is too risky.
    You can create a single-mom budget easily on Tiller, an easy-to-use budgeting app.
  • The home is the biggest financial asset for most couples. You walk away from that, you may lose a lot of assets — even if he buys you out. Why?
  • 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 is very likely to be lower post-divorce in the short-term, 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.
  • The emotional reasons to keep the house include providing a measure of stability for you and your kids during a tumultuous time. This includes staying in the same schools and close to friends and neighbors who provided emotional and practical support.

However, there are lots of very good reasons to let your marital home go — whether to your ex, or to sell it on the market.One of the biggest mistakes I have seen in my work, as well as have heard from divorce attorneys, is women's insistence on keeping the marital home in divorce — to her detriment.

Reasons NOT to keep the house in divorce:

  • You can't afford it. Accepting that your income is now lower after divorce, and therefore you lifestyle must change, is often very difficult — especially for the lesser-earning spouse, who unfortunately is usually the woman. Going into debt, facing losing that very home you so desperately want to hang on to, and the emotional turmoil that financial stress induces is just bad news. Don't.
  • Selling helps you move on. Houses are emotional things. That house likely represented a family and life that you wanted very much to succeed — but things turned out differently. Nothing like new real estate (and furnishings!) to relaunch your new life, and put your old one behind you. The same goes for when you sell an engagement ring or some other item that you shared.
  • A new home is empowering! Whether you are purchasing a new house or renting a place on your own, moms tell me that doing this solo is one of the most empowering things they've ever done.
  • It (might) teach your kids financial responsibility financial. Because your home is likely your biggest financial asset, you should treat it with as little emotion as possible. Compromising your finances, emotional well-being and good sense for the sake of keeping a house you really like is not a good financial example for your kids.
  • Selling (might) teach them emotional resistance. Sometimes life sucks giant, hairy donkey balls. It just does. Divorce is usually like that. But showing a measure of grace, moving on, and making wise decisions for your whole family in the face of rotten times is one of the greatest gifts you can give your kids.
 

How to keep the house in a divorce using a cash-out refinance

When I got divorced 10 years ago, one of the biggest sources of stress — and confusion — was where I would live, and what my ex and I would do with our home. When he moved out, I stayed in the New York City apartment we’d bought together a few years before. There was a lot of equity in it, I felt like it was a good investment, I loved the home, neighborhood and building, and I didn’t want to move.

I contacted a few mortgage brokers to explore what my options were. Based on my income, the home value, terms of my divorce (which, in my case was that we split any equity in the home), a cash-out refinance was my best option. Since then, I have been able to finalize my divorce in a fair way, now own my home 100 percent in my name, and have a payment I can easily afford — plus a nice tax deduction every year.

What is a cash-out refinance?

A cash-out refinance means that you apply for and receive a new mortgage for more than you owe. Typically, you can cash-out up to 85 percent of your home’s value. This was a great option for me, because I owed my ex a lot of money — which I did not have at the time — there was enough equity in the home, interest rates were lower than when we bought the home, and my income was enough so that I could comfortably afford the new payments.

Here is an example:

Let’s say there is $200,000 left on your mortgage, and your home is now worth $350,000. With a cash-out refinance, you might refinance up to 85 percent of your home’s value ($297,500) and take part of the $97,500 difference back in cash to spend however you like — including paying your ex his share of the divorce settlement.

Pros of a cash-out refinance during a divorce:

  • Easy way to access cash during a time when you may not have a lot of it
  • Interest rates on mortgages tend to be lower than if you were to do a home equity line of credit, home equity loan, personal loan, or credit card advance.
  • Interest rates on your first mortgage are usually tax-deductible
  • You can keep your home and don’t have to move, which can be important at a time when everything in your and your kids’ lives is in flux.
  • The mortgage is now in your name only, removing your ex from the debt and deed — which can feel really powerful for you, and be an important step in separating from your marriage and starting your life anew.

Cons of a cash-out refinance during divorce:

  • Compared with a home-equity line of credit or home equity loan, closing costs can be higher
  • Signing a new mortgage may extend the period for which you pay for the home — even if monthly payments are the same or lower (this happened to me).
  • Signing a new mortgage may increase the overall sum you will pay for the property if interest rates have increased since you first financed it.
  • If the refinance means you end up with less than 20 percent equity in your property, you may need to add PMI, or private mortgage insurance, onto your loan.

How to qualify for a cash-out refinance in your divorce

The qualifications for a cash-out refinance mortgage are the same as a new mortgage, in most cases. Because you are now divorced and seeking to own the home in your name only, the qualifications are for you as a single person (not as a couple):

Who can qualify for a cash-out refinance?

Since a cash-out refinance is essentially the same as taking out a new mortgage, requirements for qualifying are similar. Homeowners who own their homes and meet the following criteria may qualify:

  • Good or excellent credit (FICO score of 670+)
  • Significant home equity — at least 20 percent of the home’s value
  • Ability to repay the loan
  • A debt-to-income ratio — including the new mortgage payment — approved by the lender.

If you choose to refinance the home in order to buy out your ex, Credible will get you pre-qualified in 3 minutes, provides offers shortly after, and allows you to upload all documents online. Get prequalified for a mortgage refinance in 3 minutes with Credible now >>

Other notes about cash-out refinance in divorce:

During divorce, finances are often very tight — where there was once one household with two income or one income plus a full-time person caring for the home and kids — there are now two households, two sets of insurance premiums, and increased need for child care — not to mention legal fees.

Obtaining a new mortgage is a big commitment. Even though you may be emotionally tied to your current home, staying put is not always the best answer. Even if your mortgage payment stays the same after the refinance, you may not be able to afford it without stress and scramble every month. Also, while the thought of leaving your home may feel traumatic today, you may feel differently in months and years to come. In fact, you may want to break free from old memories and expectations that are attached to the home.

Really want to keep your house in your divorce?

A refinance — including a cash-out refinance — can be a great option.

A refinance in a divorce typically works like this:

If the house was in both spouses' names, or in the the name of other spouse (your husband, for example), you may want to refinance the home so that your name only is on the deed and mortgage. This relieves the other spouse from any financial or legal responsibility of the home, and can give that other spouse their share of the equity in the home.

You may also be able to get cash out to pay off credit card debt, student loans, medical debt, or your divorce lawyer. 

To see what your refinance options are, based on your credit score and income, Credible lets you learn your options in less than 3 minutes.

  1. Go to Credible.com 
  2. Fill out a single form with information about your income, credit score, and information about your home.
  3. Compare your options.
  4. Get on with your life!

Refinance your home with Credible now >>

 

Really want to sell your house after your divorce?

Of course, you may want to sell your house, and that could very well be the best decision. Reasons include:

  • You can't afford the house on your income alone
  • You want to downsize into something less expensive 
  • You want to downsize into a condo / town-house / smaller digs because it is easier 
  • You're relocating for a job
  • You're relocating for a boyfriend
  • You're relocating to be closer to friends / family 
  • You want a fresh start in a new place of your own
  • You just want to sell the damn house, OK?

Really, you don't have to explain yourself to anyone! 

Typically, when you sell a home and work with a broker, that costs you 5% of the sales price. Thanks to really easy-to-use technology at HomeBay, you can pay just a small fraction of that in a flat fee based — typically around 1% of the final sales price.

Here is how HomeBay works:

  1.  Go to HomeBay.com. Enter your address, property type, and when you want your listing to go live. HomeBay generates a custom to-do list based on your goals and property. These include prepping your home, and determining an asking price. 
  2. Set up the listing. HomeBay will send a professional photographer to shoot the photos, provide a yard sign, and help you set your asking price.
  3. Go live. HomeBay distributes your listing to the Multiple Listing Service (MLS), as well as Zillow, Redfin, Trulia, and Realtor.com.
  4. Show your house. Book tours, agent and buyer showings and open houses through HomeBay, which coordinates with you to confirm dates.
  5. Review offers. HomeBay flags unusual interactions to help you avoid difficult seller situations. Once you accept an offer through the platform, your home is placed on “Pending” status.
  6. HomeBay manages all the closing paperwork for you. You attend the closing, sign the paperwork. Done! 

Sample savings using HomeBay to sell your house:

Home priceWith traditional agent*With HomeBay
(estimate)
$200,000$10,000$2,000
$300,000$15,000$3,000
$500,000$25,000$4,000

*Agent fees have averaged 5% of home sale price in recent years, according to Bankrate.

Sell your house with HomeBay now >>

About Emma Johnson

Emma Johnson is an award-winning business journalist, noted blogger, and bestselling author. A former Associated Press Financial Wire reporter and MSN Money columnist, Emma has written for the New York Times, Wall Street Journal, Forbes, Glamour, Oprah.com, U.S. News, Parenting, USA Today and others. Her #1 bestseller, The Kickass Single Mom (Penguin), was named to the New York Post's ‘Must Read” list.Emma regularly comments on issues of modern families, gender equality, divorce, sex and motherhood for outlets like CNN, Headline News, New York Times, Wall Street Journal, Fox & Friends, CNBC, NPR, TIME, MONEY, O, The Oprah Magazine and The Doctors. She was named Parents magazine’s “Best of the Web,” “Top 15 Personal Finance Podcasts” by U.S. News, and a “Most Eligible New Yorker” by New York Observer.A popular speaker, Emma presented at the United Nations Summit for Gender Equality. Read more about Emma here.  Find out Emma's top Single Mom Resources here.

98 Comments

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  2. […] Deciding whether to keep your house? Read one divorceés pro and con list for keeping the former marital […]

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    When the California family court was done with me ..she got the gold mine and I got the shaft.
    Men don’t marry em or you will look back 20 years later and wonder where you would be if just hadn’t got married to that witch!

    Besides, there isn’t a women on this planet that respects you the day after the honeymoon so why ruin it by marrying them. The day they said “I do” was the last day they “did” and now they “don’t”.

    The best woman is the one you don’t marry! Keep em honest!

  5. Should women keep the house in divorce? - on February 26, 2018 at 4:22 pm

    […] September 1, 2016 […]

  6. Lana Sophie on January 6, 2018 at 10:13 pm

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  7. Quitwhining on November 19, 2017 at 11:26 pm

    To all these butthurt people, both men and women, going on and on about how they will never trust another man or woman again, every single one they’ve ever dated was a no good cheater or druggie, etc., I have a very useful expression for you: if you lie down with dogs, you will get up with fleas. If you have one relationship which unexpectedly goes south, usually during some life changing event, then ok, stuff happens and people change. If you’re on here listing 3 and 4 examples of relationships gone wrong…. you’re the common denominator. Why don’t you examine yourself and think about why the only partners you seem able to attract are no good? Maybe quit looking for love in bars and sketchy chat rooms and try to meet some high quality people. That of course requires that you make sure YOU have the qualities that a high quality person is looking for.

  8. lucy on November 10, 2017 at 2:31 am

    I had breast cancer in 1998 .my husband basically threw me away then .he stopped sleeping with me even after a week in the hospital and me almost dieing .never once did he check on me in the night . 17 years later he left me for an old girlfriend .I felt like for years I wasn’t wanted because I only had the one breast no longer whole in his eyes . After 30 + years of marriage I don’t know if I could let another man get close to me . Fear they too would make me feel like a monster with a deformed body.

  9. annalevis on August 30, 2017 at 11:09 am

    One particular primary good thing about uncontested divorce is the savings in divorce costs. While legal professional representation will often be a good idea even in an uncontested divorce, the sleek procedure includes lowered courtroom costs, as well at lowered legal professional bills.

  10. Paralegal Divorce on February 25, 2017 at 2:42 am

    There is not a single house only as there are lot of different things which both of them have to look when they go for the divorce option.

  11. The Very Truth Of All on October 28, 2016 at 2:43 pm

    Just too many Low Life Loser Pathetic women nowadays that have caused many Divorces over these years do to their Cheating ways. And the very sad thing is that since Most of them Can’t stay Faithful anymore today which will Cause many more Divorces later on.

  12. Niki on October 17, 2016 at 9:53 pm

    Men are so greedy. They think they are so much better because they generally earn more than women – yet here we are – raising their kids without their support or help and get shit on for it. All they want is their assets, they don’t think about their kids – it’s only themselves.

  13. randy jacks on September 21, 2016 at 10:23 am

    Creative discussion . I was enlightened by the insight – Does someone know if my assistant might grab a template VA VSA 17A form to edit ?

  14. Trying to be Perfect on September 18, 2016 at 1:48 pm

    I left with my kids and nothing more.
    He kept the house because I thought “If I cant do this alone, I’ll let the kids go live with their father and I’ll struggle on my own.” But I left him the house and moved one mile away under the condition that he stay in the children’s life. He didn’t have to pay child support. After a while he stopped calling them. He stopped picking them up. The house turned into a party house.
    He didn’t want to give me their things. He got into drugs. He still has the house alone, and my children and I are in a cramped apartment. After almost a year of separation I’m going to see if I can get my kids back into their home permanently.

  15. Natasha Wayne on September 13, 2016 at 2:58 pm

    I need all to be okay soon and be happy like me too

  16. Emmy on August 28, 2016 at 6:46 pm

    I just wanted to say – in the light of some of the stuff here – I do not want to hurt my husband or end up with more than him. We don’t have much – run down little house with £100k still to pay. He earns more than me, left me 2 years ago, after 25 years of marriage, for another woman and did not give me money towards the support of our 2 teenage children subsequently.

    I pay all bills, mortgage etc and make sure children have as much stability and support as I can muster.

    I now have to go to court to split the assets, which is an unknown thing because whilst he earns nearly twice as me he says he is broke.

    All I want is for us to end up with an outcome that is fair to both. I realise that may mean neither have the house. I am 51. He is 52. The whole thing is ripping me apart – but I never want more than him – neither do I want less. It’s like a horrible game of poker!

  17. cae on August 21, 2016 at 5:27 am

    DW, she’s a deluded sexist. That’s reason enough for her to give privilege to all women.

  18. Tyler Torrey on August 10, 2016 at 12:26 am

    I’ll fight you for it.

  19. Jeff Johnson on June 5, 2016 at 12:06 am

    I dated this woman for about two years and from day one she began talking about marriage. Wanting to go shopping and show me wedding rings and not cheap ones. After two months of dating she began to get angry with me because I didn’t seem interested in her marriage conversation. Well duh!!! Two months in?!?!? So without notice she ran off. Unheard from for 5 months. Suddenly she decides to come back and when I show her no affection she gets pissy. Uhhhh you left me not the other way around. I worked in music industry. Retired now enjoying life in my 40s flying planes and jumping from them. Well eventually we talked and I carefully decided I would try to work it out. I went back on tour. The main reason I didn’t want a girlfriend was because I’m normally gone months at a time up to 10 months with only short stops home. She as most women do worked her magic and wiggled her way into my home. I had just purchased a new luxury home in a very nice neighborhood. I let her move in and days later I was gone. We talked often while I was on the road. Didn’t have FaceTime back in 2003. The bands singer got a serious sickness that stopped our tour and we all went home to rest and let him heal. I made it home and had my father pick me up at the airport. He drove me home and I walked inside my home. Went to my bedroom and there she was laying on the bed getting drove by some guy. Then the guy has the nerve to tell me to get the F out of my own house. Uhhh. Really?!? I attacked him and dragged him out of my house. Then kicked her out and threw her stuff out. Told him to take the sl*t with him. Turns out he was married and she had no where to go. Not my problem. She expected me to pay for her to get a room and later an apartment. Again not my problem.

    I never cheated. I let her live in my fancy home. She drove my BMW. Swam in my pool. And the thanks I got was her in my bed with another man. Later I find out she is heavily into swinging which she never told me about and that she enjoys meeting strange men for sex and sending them on their way.

    Although I know all women aren’t bad like this but it has tarnished my experience with women. I don’t care to marry. This same woman I’m speaking of got married and for the last 10 years or so has been cheating on her husband with a few men. I’m not one of them. She’s a friend in Facebook. I found it interesting she sent me a request so I accepted her so I could see the interesting life she seems to lead. So her husbands grandmother passed and she posted on FB saying “she’s finally gone we are RICH” once he secured his inheritance recently she has filed for divorce and wants the house, child support for two kids one isn’t his and his inheritance. I don’t know how all that works but she keeps posting that she is entitled to all of it because she is a SAHM.

    I will never commit to a woman and I don’t care about having a child with anyone. I have adopted my friends daughter since he and his wife were killed. She is an adult and was allowed to do adult adoption. So as far as being a father I am fine with what I have. Just be weary my fellow men. Women will love you and one day the switch will turn off and they will want everything you worked so hard for. I do believe women are entitled to a settlement as marriage is a union but to expect a man to cater to a lifestyle you want without work and luxury isn’t fair. It’s sad that many women will cheat and get awarded so much as if they won. 3 of my friends have gone through divorce and all 3 are severely struggling even though they work really good career jobs. One makes 6 figures and his ex wife leaves him broke. She makes him pay for everything and none of the child support goes towards the kids.

  20. Mary Jones on May 12, 2016 at 9:22 pm

    Ending a long term marriage is never easy. Untangling finances and property requires tough decisions when you are dealing with a cascade of emotions.

    I was married 25 years. I moved all over the country for my spouse’s career. I worked and put him through school. I am the mother of his children and I cared for our family because my husband wanted me to put his career first.

    Divorce was not my choice. My spouse chose to blow up our lives and cash out his retirement for a woman 20 years younger. He chose to leave us and move out of state. The consequences of those choices resulted in spousal support and child support. I am not being greedy. When someone breaks a contract there are consequences.

    As for the house I kept it and the equity. It was a wise business move. You love someone and trust them and make decisions based as a couple. When those rules no longer apply I should not have to explain why I should receive compensation. There are no winners but a spouse has earned compensation that is fair. Sometimes fair is equal and sometimes fair is not equal.

    Keeping the house is not a one size fits all solution but you shouldn’t discount the long term benefits or liabilities in your situation.

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