Expert: How To Survive Financially If You Get Divorced and Own a Home

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Getting divorced can be one of the most difficult things in life to experience, and owning a home can make the process even more stressful. Not only do you have to figure out your new lifestyle, but you also have to figure out how to afford housing payments despite probable changes to your family income.

And even though financial issues are a common factor leading up to divorce, the picture doesn’t always improve afterward. In fact, 59% of divorcees say they went into debt after their divorce, according to a Debt.com survey. And among those who took on post-divorce debt, 41% incurred over $5,000 in debt.

So, if you own a home and want to avoid falling into a bad financial situation after divorce, what can you do? In this high-interest-rate, high-cost environment, the challenge is even greater.

“Right now, the hardest part about the divorce agreement is whether or not they can afford the house, or even if they can’t afford the house, can they afford a different house?” said Regina McCann Hess, certified divorce financial analyst, president and financial advisor at Forge Wealth Management.

“It’s become a domino problem, where even if they can’t afford the house they’re living in, they can’t afford to buy another house, and then rents have skyrocketed, so it’s a real tough situation,” she added.

However, that doesn’t mean you can’t figure out how to financially navigate a divorce while owning a home. Here are some steps you can take to increase your chances of success.

Figure Out What’s Driving Your Decision

A good place to start is figuring out what your motivations are when it comes to deciding where to live.

“Before we get into the money part, one thing I do have a conversation with people about, especially women, is whether it’s an emotional decision or a financial decision to stay in the home,” said McCann Hess.

Sometimes people make an emotional decision to stay in the same home, such as because they want their kids to stay in the house they grew up in, explained McCann Hess. But that emotional decision-making can backfire, “because they pour everything into trying to stay in that home, and then eventually they wind up depleting all their assets.”

If you do want to stay in the same home after getting divorced for emotional reasons, it’s still critical to make sure that the numbers work financially.

Discover:

Get a Home Inspection

To get a better sense of whether you can afford to keep your home after getting divorced, McCann Hess recommended getting a full home inspection. That differs from an appraisal, as it’s not just the value of the home you’re considering in this particular situation. With a home inspection, you want to find out if there are issues you’re unaware of that could deplete your savings if you stay.

If you’ve been living somewhere for a while, “you’re not even paying attention to things that are falling down behind the scenes,” McCann Hess said. “But you could have a $50,000 mold remediation that you don’t even know about.”

These types of issues could affect your decision to keep your home or move. The issues discovered during a home inspection could lower the value of your home when it comes time to sell, but at least you’d know about and can plan for these costs in advance, rather than getting surprised when a new buyer does a home inspection and then asks for seller credits. Or, you might be able to discover issues proactively that don’t cost a ton to fix now but would cost much more if left untreated.

Determine the Total Cost of Home Ownership

In addition to looking at costs uncovered by a home inspection, those getting divorced need to determine the total cost of home ownership to figure out what to do next. In addition to the mortgage payment, factor in taxes, insurance, upkeep/maintenance and repairs, said McCann Hess.

Get specific about these costs. For example, “what’s your plan for lawn care and snow removal? Can you do it yourself? Or are you going to have to pay somebody to do that, so you have to add that into the budget?” said McCann Hess.

Going from two incomes to one can make affording all these expenses difficult, but it’s important to know what lies ahead. If you’re only making your decision based on the mortgage cost, you might end up in a financial hole down the road due to all the other costs associated with home ownership.

Compare Alternatives

Once you have a good idea of the total cost of home ownership for your current home, you can get a better sense of how that compares to alternatives.

In the current environment, many homeowners will struggle to find good alternatives due to high mortgage rates and rent costs, explained McCann Hess. Still, it’s worth looking into other options.

For example, one client of hers was able to get an assumable mortgage, meaning they took over someone else’s existing mortgage. While that’s rare, said McCann Hess, it’s worth trying, given the gap between many people’s mortgage rates of around 3% and current mortgage rates that are more than twice as high.

She also has referred clients to career coaches in order to get some divorcees back into the workforce or into higher-paying jobs so they can afford their current home or a new one.

But if the numbers still aren’t adding up in terms of finding a new home that you can afford nor being able to keep up with the cost of your current home on one income, then you may need to consider more unique arrangements.

For example, said McCann Hess, some divorced couples with children have agreed to keep their home for a couple of years and then take turns living in it when it’s their turn with the kids. Then, the other spouse stays in a smaller rental — sometimes divorced couples even share this rental on an alternating basis to keep costs down.

“If it were 10 years ago, one of my biggest things was talking clients out of staying in the marital home, because a lot of times they really couldn’t afford it,” she said. “But because the rental market and the rest of the housing market and interest rates are so high, we’ve kind of shifted that, because a lot of times they can’t afford to move. So that’s why we’ve gotten a little bit creative.”

Preparing for the Worst

Overall, affording homeownership after getting divorced is often difficult, but in this current environment, renting isn’t always easier. So, these circumstances could be a good reminder that while you might not want to think about the possibility of getting divorced, it can be helpful to prepare for the worst.

For example, if you haven’t been paying attention to your credit score or have been relying on your spouse, consider if there are things you can do to improve your score to qualify for a better mortgage rate if you eventually need to, said McCann Hess.

Early in your marriage, even before your wedding day if applicable, it’s also helpful to go over finances with your partner so you’re on the same page about income, expenses, debts, etc.

“We spend so much time planning the wedding, and I’m guilty of that too, yet we spend zero time talking about our financial foundation,” said McCann Hess.

“What you see a lot is that one of the spouses handles the financial stuff and that other spouse completely checks out,” she added. “And they find out much later that maybe it wasn’t as okay as it could be.”

So, staying involved in your family’s finances, whether or not you ultimately get divorced, could go a long way toward improving your financial picture and ability to afford a home.

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