Your divorce negotiations have begun and one of the first things you must consider is how to handle the family home. For those who find themselves making this decision about a home where they have started their family and want to provide a sense of stability for their children going forward, keeping the family home may appear to be the right thing to do. However, this decision can potentially negatively impact your family’s financial future without your realizing it.
If you have intentions of keeping the home, in many cases, it means you are responsible for paying the mortgage and property taxes on your own for the first time. Along with the many other changes that come with a divorce, you may now be facing these new costs without having the income streams you are accustomed to. To help in making this decision, I recommend creating a post-divorce budget with updated sources of income and a thorough list of expenses, including your future home costs. You can use our Cash Flow Spreadsheet to make this tedious task a little easier! Preparing your post-divorce budget is the first step in determining if taking on these additional home costs are realistic for you and your family.
Being a homeowner is more than just making mortgage payments every month. Another thing you will want to consider before making this decision are future, and often unexpected, home repair costs. Given that you chose to keep the home, you likely settled for receiving less in cash or investment assets, possibly limiting your ability to pay for these inevitable repairs.
If you are planning on taking withdrawals from your liquid assets to fund your mortgage payments or home repairs, you should have a clear understanding of how these withdrawals will impact your financial future. This can be an especially daunting task for those who are taking on financial responsibilities for the first time. The good news is that your financial advisor can help. By considering all the factors that go into a divorce negotiation, including keeping the home, we can prepare cash flow projections that allow you to make your settlement decisions based on facts, not emotions.
Every divorce is different. The important thing is to set aside emotions, and prepare yourself for making difficult, complicated decisions by understanding their impacts on your finances. If you find that keeping your family home will significantly impact your ability to retire or achieve other important financial goals, it may be time to consider other options like downsizing or renting. While not keeping the home may feel like another overwhelming change during what is already a difficult transition, you are actually taking one of the first steps in preparing your family for a financially healthy new beginning.
Read more from the Fragasso Blog!
Q&A with a CDFA® (Certified Divorce Financial Analyst)
A CDFA®, or a Certified Divorce Financial Analyst, can help you uncover the many factors that are often overlooked and need to be considered. They can provide clear, concise and detailed guidance during this transition period and well after.
Read our blog interview with Mallory Labik, our in-house CDFA®. This blog reviews the importance of speaking to a CDFA® before or during a divorce. Learn about how working with a CDFA® and a divorce lawyer has many advantages. Read more!