Dear Heather: Unfortunately my wife and I are getting divorced. I think this means we are going to have to sell our house. What are our options? — Getting Divorced

Dear Getting Divorced: Divorce is a tough situation which opens up many emotional and financial issues to be solved. One of the most important decisions is what to do about the house. In the midst of the heavy emotional and financial turmoil, what you need most is some non-emotional, straightforward, specific answers. Once you know how a divorce affects your home and your mortgage, critical decisions are easier. Your real estate agent, being a neutral third party, can help you make logical, rather than emotional decisions.

Probably the first decision is whether you want to continue to live in the house. Will the familiar surroundings bring you comfort and emotional security, or unpleasant memories? Do you want to minimise change by staying where you are, or sell your home and move to a new place that offers a new start?

Only you can answer these questions, but there will almost certainly be some financial repercussions to your decision process. What can you afford? Can you manage the old house on your new budget? Is refinancing possible? Or is it better to sell and buy? How much house can you buy on your new budget? I have outlined some information to help you ask the right questions so you can make informed decisions that will be right for your situation.

Four options

You have four basic housing options when in the midst of a divorce:

1. Sell the house now and divide up the proceeds.

2. Buy out your spouse.

3. Have your spouse buy you out.

4. Retain joint ownership.

It’s important for you to understand the financial implications of each of these scenarios.

1. Sell the house now and divide up the proceeds.

Your primary consideration under these circumstances is to maximise your home’s selling price. An agent can help you avoid the common mistakes most homeowners make which compromise this outcome. As you work to get your financial affairs in order, make sure you understand what your net proceeds will be — ie after selling expenses and after determining what your split of the proceeds will be. Note that the split may not be 50/50, but rather may depend on the divorce settlement and the source of the original down payment.

2. Buy out your spouse.

If you intend to keep the house yourself, you’ll have to determine how you’ll continue to meet your monthly financial obligations if you now only have one salary. If you used two incomes to qualify for the old loan, refinancing on your own might be a challenge.

3. Have your spouse buy you out

If you are the one who is leaving, you have the opportunity to start again in new surroundings with cash in your pocket. However, be aware that the old home loan should be refinanced; if not, most lenders will consider both you and your spouse as original co-signers to be liable for the mortgage. This liability will make qualifying for a new mortgage difficult for you if you decide to purchase a home, even though you won’t have legal ownership.

4. Retain joint ownership.

Some divorcing couples postpone a financial decision with respect to the home and retain joint ownership for a period of time even though only one spouse lives there. While this temporary situation means you have no immediate worries in this regard, sometimes it is harder to move on emotionally when you are living with reminders of your married life every day.

When you decide to sell

If you and your spouse decide to sell your home, it will be important to work together through a professional to maximise your return. Differences aside, you both should be present when a listing contract is put together. Both of you should understand and sign this contract, and both should be active in the ultimate negotiations.

When you buy your next home

Use the proceeds from your previous home or buy out to determine an affordable price range for your next home. Be realistic, you do not need financial stress on top of everything else. Maintain a clear focus on getting the right home to suit your new situation. Your real estate agent will help you find a home that matches your new home-buying criteria. It may be a step down from the home you are used to, but remember your current situation is not your final destination.

• Heather Chilvers is among Coldwell banker Bermuda Realty’s leading sales representatives. She has been working in real estate for 25 years. If you have a question for Heather, please contact her at hchilvers@brcl.bm or 332 1793. All questions will be treated in confidence.