It’s not surprising that you hold a strong opinion – and strong feelings – about your home.
Owning a home is a big piece of the American Dream for many people, if it’s not THE American Dream itself.
But for women facing change, especially divorce, what to do with the home – your home – needs careful consideration.
You may have lived in your home for 5, 15, 25 or more years. You may have raised children in this home. And even if your marriage is ending, you likely share some happy memories of your home with your soon-to-be-ex.
Considering the time spent and memories collected in your home, it’s understandable that it’s an emotional topic.
When you also consider all the added emotion, drama, and change associated with divorce, your life can feel like it’s spinning out of control. It’s natural to want a solid foundation in the midst of the chaos. Your home feels like a familiar, safe haven in an otherwise stormy time in your life.
But be careful not to let your emotions lead you to a potentially costly decision surrounding your marital home.
The Downsides of Keeping Your Marital Home
Every once in awhile, I encounter a situation where the family home is almost or completely paid for. There is no mortgage, or it can be extinguished with a relatively small chunk of assets received in the divorce settlement.
But usually, there’s a mortgage on the home. And sometimes it’s a big mortgage with a big monthly mortgage payment attached to it.
Even if you’re working and earning an income, even if you expect increased cash flow through alimony or child support – it’s a big financial obstacle to overcome if you’re saddled with a monthly mortgage payment of $2,000 or more each month.
Yet, when I suggest that women facing divorce consider selling their home (assuming they will receive it once the divorce is final), you’d think I uttered something blasphemous.
Sell my home? Right now? With everything that I’m dealing with?
Or, a more common response is that they can’t imagine selling the home right now because that would simply be too much change for their young children who will be living with them most of the time.
And before you jump to the conclusion that I’m a cold-hearted financial guy who cares about nothing but the numbers, that’s not the case.
I appreciate your situation, your emotions, and your feelings. I couldn’t spend much of my time working with women dealing with divorce or other major life changes if I weren’t empathetic to their situation.
But I also want to look at the bigger picture. I hate to see women like you make a short-term decision about what is perhaps your largest financial asset only to have it potentially prove to be costly – to your finances and your lifestyle – down the road.
So, if hanging on to your home isn’t necessarily the best idea, what are your alternatives?
When to Consider Renting Instead
Sell the home and rent for 12 months. Even if your rent isn’t significantly lower than your mortgage payment, you’re no longer on the hook for property taxes, renter’s insurance is typically much cheaper than homeowner’s insurance, and if something goes wrong with your rental, you call the landlord who will likely fix it at their expense. Some rentals will even include some utilities in your rental amount.
When you’re dealing with a lot of change in your life, it can be helpful to simplify. Renting is one way to do just that.
And don’t assume renting means you’ll be living in an apartment complex with hundreds of units filled with 20-somethings who will make your life (and your sleep) difficult.
You can rent a single-family home, a townhome, or other housing. You’re certainly not limited to an apartment complex.
Another benefit of renting is that it makes it easier to adapt to change.
Maybe you decide you don’t want to stay in the part of town you’ve been living in. Or maybe you don’t want to even remain in the same city. If you’re renting, you can more easily move to another part of town, another city – or even another country.
You’re Free to Explore Your Options
If you’re a woman dealing with divorce, you already have enough upheaval in your life without adding the responsibilities of homeownership to the mix.
If you can keep you home and the finances work – both short- and long-term – then by all means, be my guest.
Yes, conventional wisdom says renting is the equivalent of “throwing away money” when you could instead be building equity in a home. But I don’t think it’s quite that simple.
I believe it’s important for you to have choice and flexibility, not just with where you live, but also how you live. And while many might frown upon the idea of renting, I think more women who are facing divorce should consider it. At least for a while.
If you’d like to evaluate the financial impact of keeping your home, downsizing to a smaller home or renting as you emerge from the divorce process, please get in touch and let me know how I can help.
You can ultimately hear yourself saying “home sweet home” regardless of whether you’re making mortgage payments or lease payments.
Learn more about our Divorce Financial Planning services.