January is ‘Divorce Month’ — 5 Questions to Ask About Your Home

January is such a common time to file for divorce that it’s been long known as “divorce month” among family lawyers. It marks both the end of the holidays and the start of a new tax year, which can make it simpler to financially separate from your ex.

A key part of navigating a divorce is deciding what to do with your home. Your property is likely among the most valuable assets in the marriage, and it’s important to take the time to understand your options. The best outcome for yourself and your family may not be the one you expect.

1. Do you want to stay in the home or sell?

“The first thing that I would ask a client is, what would you like to do with the home?” says Kenneth Glasser, an attorney who specializes in divorce and property distribution in New York City.

It’s not unusual to have a deeply personal connection to your home, and divorce can be a time when emotions run high. Maybe you don’t know yet what you want to do — in this case, a financial planner or lawyer may be able to help you reach a decision.

You could also consult a certified divorce lending professional (CDLP) to learn more about your financial position. A CDLP can model various scenarios for dividing marital debts and assets to help you understand your ability to qualify for a new mortgage or refinance. The Divorce Lending Association maintains a database of these professionals, so you can contact one local to you.

2. What’s the value of the home?

You’ll need to have the property appraised to determine a fair value. Then, consider your options for covering your ex’s share of home equity.

The most straightforward way to do this is to sell the house and divide the proceeds accordingly. If one of you wants to keep the home, you’ll need to find a way to buy out the other.

This may involve tapping your 401(k) or other retirement accounts, says Angela Zangarola, a certified divorce financial analyst and founder of Quantum Wealth Strategies in Shelby Township, Michigan.

For many couples, retirement funds are the largest asset in the marriage apart from the home. While some folks may cringe at taxes and potential early-withdrawal penalties, this could be their only resource to buy out their spouse’s equity. “You have to do what you have to do to resolve the situation,” Zangarola says. She recommends that you have a financial professional review your case, as everyone's situation is different.

3. Can you qualify for a mortgage on your own?

If one of you wants to keep the home and there’s still a mortgage on the property, the person keeping the house will have to refinance the loan.

This is an important part of disentangling your debts, and may be necessary for the other person to be creditworthy enough to buy or rent another home. Until the home is refinanced or sold, if you’re both on the mortgage, then you’re both on the hook for payments.

Consider whether you meet lenders’ requirements for a refinance or new mortgage on your own. Even if you expect to receive child support or spousal support, a lender is unlikely to take those payments into consideration before you’ve actually started receiving them for at least six months to a year.

This long waiting period could draw out divorce proceedings, Glasser says. “Most people don't want to resolve the case piecemeal. They want to settle the entire thing.”

According to Zangarola, one way around this may be to have your attorneys draft a child or spousal support agreement while you’re separated but not yet divorced.

If you can start collecting at least six months of payments before your divorce is finalized, you could build a stronger financial profile for yourself as a newly single mortgage applicant. Per Fannie Mae guidelines, an official separation agreement is required for a lender to consider these payments as income. State laws and lender requirements can vary.

4. Can you afford a mortgage and other homeownership costs?

Even if you can qualify for a mortgage on your own, you’ll still need to make sure that you can afford it at today’s rates. If you want to keep the home and mortgage rates have gone up since the house was purchased, you’ll now be making larger monthly payments on your own.

You’ll also need to pay closing costs, even if you’re refinancing. These are often between 2% and 6% of the loan amount.

There are also expenses beyond the mortgage that you’ll have to take into account. Do you belong to a homeowners association? Will the roof need to be replaced? Will you have to pay for upkeep expenses like snow removal or cleaning gutters? There are tons of expenses that go along with homeownership, and you’ll want to make sure that you can afford to maintain a house on your own.

5. Are your children currently living there?

If there are children living in the home, it could add another layer of complexity to the situation.

You and your ex (or the courts) could decide that it’s best for the children to remain in the home with the primary custodial parent, and that you should defer the sale of the home until the children reach a certain age. This could mean delaying the full equity payout to the other parent for years, says Glasser.

In the meantime, you’d both continue to own the home. You’ll have to delegate maintenance and expenses, and you should get the arrangement in writing as part of your divorce or separation agreement to avoid future headaches.

Buying or refinancing a home while paying child support

The cost of shelter for the children could also be a child support consideration, so the non-custodial parent may be required to contribute to mortgage expenses.

These mortgage contributions are frequently wrapped into child support payments, says Zangarola. If you pay child support and apply for a new mortgage, lenders will include this in your monthly debt obligations when evaluating your ability to repay the loan.

Buying or refinancing a home while receiving child support

If you receive child support and apply for a new mortgage, lenders will also consider the number of years that you’ll be collecting payments. Most lenders will want the payments to continue for at least three years from when you apply. So, if you receive child support for a 17-year-old, a lender may be wary of counting that income towards your ability to repay a 30-year loan.

Taking ownership of your decision