When you go through a divorce, one of the many questions you may ask yourself is where you’re going to live. Of course, one option (and often the most convenient) is to stay in your own home. However, this isn’t always possible, and every divorce is different. Let’s walk through a few of your housing options after you’ve gone through a divorce.
Some divorced couples determine that selling their shared home is in each of their best interest. This often allows you to each leave your home and start the next chapter of your life. The profits from the sale can be split between the two of you depending on your divorce terms. Before you move forward with the sale, make sure to consult with your financial planner and your attorney to make sure that’s the best move.
There are situations where your ex-spouse may move out of your home willingly, but that isn’t always the case. In some situations, you may need to buy your spouse out of your shared mortgage so that you can become the sole owner of your home. If you have the cash flow to afford your mortgage payment, or the ongoing maintenance and utility costs of your home, this may be in your best interest. However, it’s also possible that handling a sizable mortgage by yourself could negatively impact your financial wellbeing and your credit score. You will likely need to refinance your mortgage if your spouse is named as a borrower.
Many divorcees choose to buy a new home after they get divorced. If you and your ex have sold your home, you may receive a percentage of the profits. Ideally, you’ll be able to use this and cash savings to come up with a down payment on a new house for the next chapter of your life.
If you’re home shopping, keep in mind that you may need to make some sacrifices depending on your unique financial situation. Make sure you align your expectations with your budget and put some thought into how much house you can afford based on your new lifestyle.
Remember that you don’t have to rush into buying a home after a divorce. This may already be a tumultuous time for you and your loved ones, so making a permanent decision with long-term financial impact may not be in your best interest. Instead, you might look at renting for a short period of time. Taking 6 months to a full year to let the dust settle and figure out what your new lifestyle looks like can have many benefits.
You’ll be able to rediscover your hometown, or explore a new area, without making the financial commitment of buying a house. During your rental season, you can boost savings, get a handle on your cash flow, and evaluate what type of house you’d be interested in buying when your lease is up (and what your budget is).
Making financial decisions after a divorce can be a challenge. Having a fee-only financial planner in your corner can help. Your planner can act as your sounding board, and help you create a financial plan that supports you best interests.
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Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs, and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.
"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.