Getting a divorce? Think about the house

Getting a divorce is tough enough, but having to sort out the house and finances can seem like a daunting process. Here’s a few tips on how to minimize your frustration, and financial exposure, during a divorce.

7

by

Online only.

7

divorce_322
My husband and I have an agreement: If either one of us is unfaithful to our marriage vows that person walks away with nothing. Absolutely nothing. No car, no kids, no house. Nada. And yes: we shook on it. We also meant it and, despite how ridiculous this gentleman’s agreement may appear to be, we share this story with family and friends, with full knowledge that our handshake would never stand up in a court of law, if it came to that.

But in era where almost half of marriages end in divorce, it was our way of trying, in a humourous way, to acknowledge that divorce and property is a messy business.

The best solution is, obviously, not to get divorced. But if separation is imminent in your life you may be curious as to how a family break up with impact the marital home.

There are three basic scenarios as to what can happen to your marital home.

Sole possession. This is when one partner opts to buy out the other partner. Often a paid appraisal is conducted, which provides a current or fair market value of the home. Then the spouse who wants to continue living in the home can obtain refinancing, which will pay the other person half of what the home is worth.

Co-ownership. This is typically only undertaken by partners who are going through an amicable divorce, as it means that both are responsible for payments and both are entitled to half the funds when the property is sold. The difficult component of this type of ownership, however, is that both people would be responsible for capital gains on their share of the profit. The spouse that remained living in the home, however, may be able to claim an exemption. Speak to a lawyer for more information on this option.

Sell. While it’s tough to uproot you and/or your family, selling can often be the easiest solution. By selling the marital home, both people are able to take their entitled portion of the sale and then able to pursue their own home ownership needs. Problems can arise, however, if the market is soft and you cannot get a good sale price for the home.

Regardless of what you and your former spouse decides to do with the home, you’ll want to consider the following:

  • Business as usual until there’s a settlement: Regardless of how bitter a divorce may become, it’s important to continue paying mortgage, property taxes and bills, at least until a settlement has been reached. Refusing to pay common debts will only hurt your future chances of refinancing and home ownership. If you find your partner is unwilling to help with the payments, simply keep receipts. Then use these receipts to seek reimbursement during the settlement process.
  • Separate your finances: As fast as possible, seek to separate your finances from your partner so you can start establishing good credit on your own. That may mean opening a separate bank account, or getting your own credit card.
  • Expediency is key: The sooner your divorce is finalized, the better you’ll be financially. That’s because mortgage professionals and other finance advisers may be unable to help you rebuild or move on until the settlement is signed and delivered.

7 comments on “Getting a divorce? Think about the house

  1. Genworth, the private mortagge insurance provider has just introduced a new Spousal Program designed for the above situation.

    This program allows a spouse to purchase their matrimonial home from their partner at 95% LTV.

    The following conditions apply:
    A purchase agreement must be prepared by a solicitor.
    Both parties must be on title.
    An appraisal required.
    It must be a legal separation.

    Reply

  2. I was about to divorce my wife and I hope your tips will help to minimize my frustration, and financial exposure during my divorce. Thanks for sharing this rare kind of information. Now getting a divorce in not tough enough after reading this article.

    Reply

  3. I don't agree that 'expediency is the key' when divorcing a spouse. Unless some reasonable time has passed, couples are too raw with emotion to be rational in making decisions that will affect their lives going forward.

    Reply

  4. Family Law is legislated provincially and so differs where you live in Canada. When a relationship ends in Ontario, legally married ones are not treated the same as common-law ones. I do believe that many people are not aware of the legal realities of cohabitation, whether legally married or not. Since separation and divorce have a significant impact on peoples' financial circumstance, I think it would be great information to outline the differences across the country in one of your future issues. This way people can make an educated and informed decision before embarking on cohabitation.

    Reply

  5. Collaborative Divorce seems like the best solution for most couples. This is assuming that both parties can separate amicably. This is always better when children are involved.

    Reply

  6. Pretty insightful post. The tips given in the article is going to help a lot of people to manage their issues when they go for divorce. I agree to the fact that, it is more frustrating to settle the financial issues than getting a divorce. Thank for the post.

    Reply

  7. Very nice article and 2 questions: Is separating finances a good case when children are there? Also how good is this for the reputation of the parents to the child when some disputes arise?

    Reply

Leave a comment

Your email address will not be published. Required fields are marked *