In 2019, 2.6 married couples out of every 1,000 in South Dakota decided to go their separate ways. In some cases, spouses sold their homes while, in others, one spouse took over the mortgage and kept living in the home shared during the marriage. If you’re counting yourself among those who will file for divorce in 2022, there are several things to keep in mind regarding finances, especially if you plan to keep your home.
Divorce can spark financial problems in many cases. It’s important to remember that, if you’re not remarrying right away, you will be transitioning to a single-income household. If, during marriage, you only had one income, and that income was yours, then the transition might not be so difficult. However, if you’ll be entering the work force for the first time in a long time, you can expect to encounter financial challenges.
Is buying out your spouse’s share of the mortgage a good idea?
Perhaps you’re thinking that it would be best to keep living in your marital home, particularly because you have children and want to cause the least amount of disruption possible in their lives when you file for divorce. The idea of this often seems financially feasible; the reality of it might be another story altogether, however.
The amount of money you’d have to come up with to buy out your spouse on your mortgage depends on how much home equity you’ve built up during your marriage. For instance, if you have $100,000 in equity and plan to split it 50/50, you must be able to pay $50,000 to buy out your spouse.
Refinancing might be the way to go
It’s a good idea to speak with a financial adviser when determining whether or not you should try to keep your marital home after a divorce. In certain circumstances, you might be able to refinance your mortgage at a lower interest rate, which would help alleviate financial burden.
Keeping in mind that you’ll have many other expenses besides a mortgage payment to cover after your divorce, you might determine that it isn’t feasible to keep your house, unless you can refinance.
Explore additional options
If you and your spouse trust each other, you might decide to continue making mortgage payments together, while only one of your keeps living in the home you shared during marriage. Maybe you don’t think that’s a good idea, either because you don’t feel like you can trust your ex to make payments on time or because you want your kids to have a fresh start in a new home.
In that case, you might determine that it’s best to put your house on the market, then split whatever profit you make beyond the amount left on your mortgage. The good news is that there are typically several options available regarding what to do with your home after a divorce, and you can negotiate an agreement that protects your financial interests and is the best decision for your kids.