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  • Candace E. Duecker, CFP®, CDFA®

Real Estate Options in Divorce

Divorce can be a challenging time, and dealing with real estate decisions in a high interest rate environment can add another layer of complexity. Here are some options to consider:

  1. Sell the Property: If both parties agree, you can sell the property and split the proceeds according to your divorce agreement. High interest rates can effect price, so it might be harder to sell the property at the desired price when rates are higher. However, if there's equity in the home, selling could provide both parties with liquid assets to move on.

  2. One Party Refinances: If one party wants to keep the home, they could refinance the mortgage. However, high interest rates can make refinancing more expensive, so the remaining party will need to assess whether they can afford the new monthly payments. Remember the home can be refinanced in the future if rates lower.

  3. Assume the Mortgage: Assuming a mortgage in a divorce means that one spouse takes over the responsibility of the home loan from the other. This is a very nuanced process that can vary by lender. Seek financial advice to navigate the mortgage assumption process and its implications efficiently.

  4. Rent Out the Property: If selling in a high interest rate environment isn't favorable and neither party wants to live in the home, you could consider renting it out. The rental income can cover the mortgage payments and any other associated costs. Later, when interest rates might be lower, or the housing market is more favorable, you can consider selling.

  5. Co-ownership: Some divorced couples choose to continue co-owning the home, especially if they have children and want to maintain stability. This might be a temporary arrangement until the market conditions become more favorable for selling or refinancing.

  6. Offsetting Assets: If one party wants to keep the home, they can "buy out" the other party by offering them other marital assets of equivalent value. This avoids the need to sell or refinance the home immediately. If there is a joint mortgage on the property, remember that buying the other party's equity and completing a deed transfer does not remove that party from the mortgage. A plan to refinance will need to be determined.

  7. Deferred Sale: This involves a legal agreement to sell the property at a future date, commonly after the youngest child turns 18 or finishes high school. The custodial parent lives in the home until the agreed-upon sale date.

  8. Short Sale or Foreclosure: In situations where neither party can afford the home or if it's underwater (meaning you owe more on the mortgage than the house is worth), you might need to consider a short sale or even foreclosure. While these options can negatively impact your credit, they might be necessary in certain circumstances.

  9. Seek Professional Advice: It's essential to consult with a family law attorney, financial advisor with divorce expertise (such as a CDFA), a qualified realtor, and a loan officer such as a Certified Divorce Lending Professional. They can provide guidance tailored to your unique situation and ensure that you're making decisions in the best interest of your financial future.

  10. Consider Tax Implications: Selling a home, especially if it has appreciated significantly in value, can have tax implications. It's wise to consult with a tax professional before making any final decisions.

Remember, the choice you make should align with both your immediate needs and long-term financial goals. Every situation is unique, so weigh the pros and cons of each option and seek expert advice.


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