If you own a home, one of the biggest questions going around in your head after separation will likely be “What happens to the house?”.
On first meeting with me, many of my clients are very quick to tell me, “I want to keep the house!”. They often come to me with this already formed in their heads as a significant goal to be attained, come what may.
You may feel the same way for a myriad of reasons. Perhaps you have a strong emotional attachment to the house as your home. You may want your children to carry on living there. The home is likely close to your family, friends, work, your book group, your hairdresser... your community! Maybe the house has been in your family for generations and you feel the pressure of not being the one to lose it. It could be that the property offers amenities needed for the animals you like to keep or the work you do from it. Deep down, is the reason (at least partly) because you do not want your ex to have it?
Whatever your reasons for wanting to keep the house, be honest with yourself about them and then carefully consider whether those reasons are outweighed by the reasons for not keeping it. In thinking about whether retaining the home is a viable option for you, I recommend you consider:
What is your motivation for keeping the house? What other options would satisfy your reasons for staying there?
You may be financially better off renting in the same area for a period of time or moving to a more affordable area. If you want stability for children, what other ways can you provide this? How significant will your reasons for keeping the house be in 2 years? 10 years? on your deathbed? This is a time to ask yourself difficult questions and to be open to all options. Do a cost/benefit analysis of all the options—you may be surprised at the outcome.
Is keeping the house practically viable?
Will the house require upkeep, maintenance or improvements that are beyond your capabilities? That lifestyle block you live on may have seemed your dream property when there were two of you to maintain it but it may quickly turn into a nightmare on your own. Ditto that “do up” you purchased together, spurred on by all those reality programmes of couples making their fortune by renovating a property then flipping it. If you have to return to work or study, is the house close enough to where you will be able to find employment or attend classes? Is it simply too large for just you or your emptying nest? If you are facing having to rely less on a car, is it close to reliable public transport networks
Is keeping the house financially viable?
This often ends up being the deciding factor for many women. To keep the house, you will usually have to raise enough money to repay any existing mortgage and buy out your ex’s interest in it, after taking into account how other assets and debts have been divided between you. Will the Bank lend you sufficient money to do this and will you be able to meet the repayments required?
Is your income stable and consistent enough to meet the repayments on your own? Relying on child support or income from boarders or Air B'n'B may prove unreliable and cause you problems in paying your mortgage repayments.
Does your existing mortgage have penalty fees if you repay it now? If your current mortgage is on a fixed rate, you may incur penalties because this mortgage will be repaid from the new mortgage you borrow to buy your ex-partner out. If this is the case, you may be best to wait until the fixed term comes to an end before completing a buy-out of the family home.
Even if you are in the fortunate position of not needing a mortgage, the house may still be a poor financial choice depending on the outgoings you face for it. Be sure to budget for other payments you will need to make on your own if you take over the home—the rates, insurances, maintenance and don’t forget the premiums for any life insurance the bank may require you to have as a condition of your mortgage.
You will usually need to complete a formal loan application in the same way you did when you first got a mortgage to buy the house with your ex. You may find that since then, lending criteria have got tighter. Some good problem solving may need to happen by you, your ex and your professionals if this is likely to be an issue. If you think you want to keep the home and need to arrange finance, make your application to the Bank sooner, rather than later. Doing so means you will know early on whether it is possible. You will avoid a situation where you negotiate to keep the home, only to find you cannot get the finance you need.
Is keeping the house emotionally viable?
Even if the finances stack up, the emotional costs may not.
Are you in the right emotional space to be able to live in a house that provides ongoing, daily reminders of your relationship or marriage? Will staying there impede your ability to move on emotionally and psychologically? You may think to help yourself overcome this by making renovations or cosmetic changes to firmly put your stamp on the house and make it your own. However, this can be financially and emotionally draining.
Can you live with the consequences if it all goes wrong?
If you keep the house and you find your circumstances change, what will happen? What are the repercussions if you have a change in finances and can no longer afford it? Could you suddenly need to accommodate aging parents or other family members (boomeranging adult children?) for which your house will not be suitable?
I got thinking about this blog after hearing of a woman who fought hard to keep the house after a separation, only to have to put it on the market for sale less than a year later because it had proven to be unaffordable. She is now in a worse financial position than she would have faced if the home had been sold as part of her property settlement with her ex. If you end up having to refinance or sell before it has been able to sufficiently increase in value, the likely result is that you will end up worse off due to refinancing costs or real estate agent’s commission and conveyancing costs. If you and your ex-partner sell the house on your separation, the costs of sale and commission are carried equally by you both. Once you own the home yourself, those costs are yours alone to bear in the future.
I don't want to rain on your "keeping the house" parade. In many cases, keeping the family home can be a sensible and appropriate decision, particularly in situations where the housing market means you can't afford to buy elsewhere or your likely rent would be higher than you would pay on your mortgage. Just make sure you have done your homework, listened to professional advice and considered all the available options.
Do let me know what your experience of deciding what to do with the house has been!