Divorcing spouses face many difficult decisions when splitting up assets; one of the biggest is what to do with the marital home. Often, one spouse wants to remain in the home for emotional reasons or because of the children. The other spouse may prefer to sell the house and split any profits. So how do you decide whether to keep the house or take the money in a divorce settlement? There are emotional and financial factors to weigh carefully on both sides.
Pros of Keeping the House
For the spouse who wants to stay, keeping the marital home has these benefits:
Stability for children
Remaining in the family home provides consistency for kids already dealing with the upheaval of divorce. Changing houses exacerbates their stress.
The house likely holds many memories and emotional significance, especially if lived in the long term.
Keeping the house avoids the hassle of moving and changing kids’ school districts.
Lock in low-interest rate
If the house has an existing low mortgage rate and payments are affordable, keeping it allows avoiding taking out a new loan at higher current interest rates.
Money already invested
Selling the home means walking away from all money already paid into the mortgage principal and any renovation investments.
Strong housing market
In a hot sellers’ market, selling now may mean losing out on future home appreciation. Keeping the house allows capturing any rising home values over coming years.
Cons of Keeping the House
There are also drawbacks for the spouse wanting to stay in the home:
Can’t afford payments alone
Without dual household income, one spouse may struggle to afford the mortgage, taxes, utilities and upkeep alone.
Cost of upkeep
From repairs to yardwork, the workload and expenses of home maintenance fall solely on one person.
Staying may make it harder to move forward if the house Contains many memories and associations with the ex-partner.
Less money in settlement
With more assets tied up in the house, the spouse keeping it may get less money, retirement funds or other assets in the divorce settlement.
Future moving difficulties
Keeping the house now makes it harder to sell and split proceeds equitably down the road when kids are grown or life circumstances change.
Pros of Selling the House
For the spouse who prefers liquidating the home, these are potential advantages:
Equal division of proceeds
Selling the house allows dividing the profits 50-50 in most states, providing assets each spouse can use to start over.
Less financial burden
Removing a large mortgage payment and other housing costs makes it easier for each ex to afford living expenses post-divorce.
Forming a new life and future is often easier in a new living space not associated with the former marriage.
Money from the sale provides savings and assets protecting each spouse should they become injured, sick, or laid off.
A sold house represents a clean financial and emotional break that can help with closure and moving forward.
Cons of Selling the House
The spouse pushing to sell the home may encounter these drawbacks:
Downsizing or relocating means spending money on moving, storage, changing schools, buying/renting new housing, and changing utility accounts.
Lose future appreciation
If the market is rising, selling now surrenders potential price gains later by giving up the house.
Emotional costs for family
Uprooting kids from their homes and neighborhood adds to the disruption and grief of the divorce.
Renting may cost more
Rent payments may ultimately exceed the formerly shared mortgage costs, reducing savings from the house sale.
Selling could mean giving up the mortgage interest and property tax deductions, resulting in higher annual taxes.
Tips for Deciding What to Do
When determining whether to keep or sell the marital home in a divorce, remember:
Seek compromise if possible
Can one spouse buy out the other’s share to keep the house? This resolves one party’s attachment while providing the other needed funds.
Weigh children’s best interests
Avoid uprooting kids from school and friends unless absolutely necessary.
Review finances closely
Calculate if either spouse can truly afford the home long-term or if sale proceeds are needed for the future.
Get professional advice
Consult lawyers, financial planners, lenders, real estate agents and therapists to gain insights before deciding.
Consider future plans
Will career, family size or geography changes impact housing needs down the road for either spouse?
Give it time
Waiting 6-12 months before deciding allows each spouse to stabilize finances and think clearly, instead of acting rashly in the turbulent aftermath of separating.
Whether keeping the cherished family home or splitting the sale proceeds makes better sense depends greatly on the specific couple’s situation, priorities and resources. Consulting professionals and considering all options from legal, financial and emotional standpoints can help lead to the best decision.
Deciding whether to keep or sell the marital home during a divorce is complicated emotionally and financially. There are valid points to consider on both sides of the issue. The spouse wanting to stay gains stability for the kids, retains emotional ties to the home, and avoids costs of moving. However, going solo on the mortgage and upkeep can prove financially difficult. The spouse seeking sale can walk away with their share of equity and make a fresh start. But this requires sacrificing potential appreciation and uprooting the family.
Ideally, compromise like a buyout agreement can let one keep the home while providing the other needed funds. Regardless, thoroughly weighing the children’s well-being, finances, future plans and professional advice allows making an informed decision. With emotions running high during a divorce, patience is key. Waiting several months before finalizing plans for the house allows both spouses to stabilize and think clearly when determining if keeping or selling makes the most sense long-term.
Another important factor
Another important factor to weigh is the housing market and economic conditions when deciding whether to keep or sell the marital home. In a slow housing market with low demand, sale prices will be lower and it may be better to wait out a slump before listing the house. Paying the mortgage alone may be affordable compared to taking a loss. However, if high interest rates have caused monthly payments to become unmanageable, sale and downsizing may be the only financially viable option.
In a hot seller’s market with bidding wars, selling the house could mean walking away with substantial equity to divide. But both spouses give up gaining from future appreciation if prices keep rising. It’s critical to realistically assess if the market has peaked or has more room to gain value in the coming years. No one can predict the housing market, but looking at historical cycles and expert projections can provide some sense of where things are headed.
The broader economy also impacts the keep versus sell decision. During strong economic times when incomes are rising and jobs are plentiful, a single spouse has an easier time managing solo housing costs. But in recessions with widespread layoffs, holding onto an expensive house can be risky if it’s unclear whether mortgage and upkeep bills can still be covered.
Health insurance and retirement benefits are impacted too. The spouse who carried the family health plan will need to obtain coverage. Retirement accounts are divided upfront in divorce settlements in many cases. This provides each spouse their share, but may leave both with fewer assets continuing to grow tax-deferred for the future.
Gaining some emotional distance and stability before reaching a keep or sell decision allows calmly weighing all these financial factors. An amicable mediation process can also help craft solutions addressing both spouses’ needs. Perhaps one buys out the other’s share over time to keep the house. Or the house lists at a compromise time – not immediately, but not waiting indefinitely for the perfect market either. With goodwill and compromise, an optimal outcome balancing practicalities, emotions, and long-term security can be achieved.