Buying the perfect family home is not always easy, but most couples in Pennsylvania find that it is a worthwhile venture. From decorating it perfectly to filling the space with family memories, family homes hold a special place in people's hearts. However, divorce can disrupt your future plans for you dream home. Deciding what to do with the family home after divorce is not easy, especially if you hope to keep it during property division.
You should understand the financial implications of all your options before making any decision. This requires more up-front work than most people realize. You will need to look into a number of financial factors, such as home equity, upkeep and taxes. Taking these important steps will help you understand whether you can afford to maintain ownership of the family home.
Your home equity is important
Equity is the net value of your home. To determine how much equity you have, you should first determine the value of your home. You cannot rely on its value at the time of purchase, and you should not try to guess the figure. Instead, one option is to seek out an experienced, unbiased appraiser to determine the home's market value. There are also other options, such as using a comparative market analysis.
After determining the value, you subtract any encumbrances or liens against the home. This includes things like:
- Mortgage balance
- Equity credit line
- Debt lien against the property
What is the cost of buying out your ex?
Now that you have determined the equity of your home, you can decide if you can afford to buy your ex out of his or her portion of the home. Since Pennsylvania is an equitable division state, you may not automatically own an equal 50% of the equity. It is possible that your ex owns more or less equity than you do, which can affect your ability to buy him or her out.
There are also other factors that can complicate this decision. If you or your ex used separate funds that were not marital property to make your down payment or to pay for renovations, you might have to subtract those amounts from your home's value.
Research your mortgage options
Buying out an ex-spouse's equity in the marital home usually involves taking out another mortgage. Making monthly mortgage payments can be difficult when going from two incomes to only a single income. Consider shopping around at different lenders to see what your monthly mortgage might be. You could also apply some of your other assets toward the buyout, which could reduce your monthly payment.
Your family home holds a lot of good memories, so it can be hard to let go of the house. If you can afford to keep the home, then doing so can be helpful during an otherwise emotional experience. However, since deciding what to do with the family home after divorce is actually a significant financial decision, you may find it helpful to speak with an experienced attorney who can help you better understand your options.