KEEPING THE HOUSE AFTER A DIVORCE

When you are going through a divorce and you are deciding what to do with the marital home. There are generally 3 options, buy out the other spouse, sell the house, or the couple can continue to co-own the house.

There are several reasons why you may want to keep the marital home and buy out your ex out of the mortgage.

·        You might not want to up root your children from the neighbourhood and their schools.

·        You may want stability in an unstable situation.

·        You might have a sentimental or emotional attachment to the home.

·        Or you want to stay close to your family and friends.

If you decide to buy out your ex-spouse, the first step is to figure out your finances. Are you able to pay for the mortgage, property taxes, insurance and maintenance?

If you decide you can afford the buy-out, then you have to decide how to pay for the buy out. You have two options.

1.      You can pay for the buy-out with your own assets.

2.      You could do a cash-out refinance which would pay out your ex’s equity, along with the remainder of the mortgage and allow you to remortgage the property.

The last step is to figure out the value of the home. There are two ways to determine the home’s value.

1.      Through a CMA (comparative market analysis). This is conducted by a Realtor.

2.      Or an appraisal. Which is done through an appraiser.

A CMA is done by using comparable sales in the neighbourhood based on location, square footage, number of bedrooms and bathrooms, age and condition of the house.

An appraisal is done by a professional appraiser. Appraisals are commonly carried out during home transactions and in refinance transactions.  Banks will often use appraisals to make sure that the home selling price is fair for the condition, features and location of the home. If you are trying to figure out the best route to determine the value of the home through a buy-out, an appraisal would be a better option.

 Once you figure out your house expenses, mortgage qualifications, and what you will be paying for the buy-out.  It will give you a good indication of whether you can afford the buy-out if it makes sense and will not leave you house-poor with an uncomfortable financial lifestyle.

 If a buy-out is not in your favour, there are other options to sell and find another home in a comfortable price range in the same neighbourhood.