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Your real estate options after divorce

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Dear Heather,

My spouse and I are getting divorced. We have two young children and together we own a home which is worth about $1 million but we have $200,000 left to pay on the mortgage. It's hard to think clearly through all the emotional and financial turmoil, can you help me by telling me what my options are?

Single Parent

Dear Single Parent,

I feel for you. I have been through a divorce myself and I know it is very hard on all parties involved. Divorce opens up many emotional and financial issues and one of the most important decisions is what to do about the house, as this is likely your most valuable asset.

First you have to decide whether you want to continue living in the house. Will the familiar surroundings bring you and the children 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 you 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 on your new budget? Can you manage the current house? Is refinancing possible? Is it better to sell and buy, or even rent, until you find a sense of equilibrium? The following options may help with your decision-making:

1, Sell the house and divide up the proceeds

2, Buy out your spouse and stay

3, Have your spouse buy you out

4, Retain your joint ownership for a set period of time

1, Sell the house and divide up the proceeds

Your primary consideration under these circumstances is to maximise your home's selling price. A good realtor 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 determine what your share of the proceeds will be. Note that the split may not be 50/50 but rather may depend on the divorce settlement, the source of the original down payment, and who was making the mortgage payment.

2, Buy out your spouse and stay

If you intend to keep the house yourself you'll have to determine if you can continue to meet your monthly financial obligations on one salary. If you used two incomes to qualify for the current mortgage, refinancing on your own might be a challenge. Even if you don't have to seek financing from a lending institution, it is a good idea to have a professional appraisal done to objectively determine the market value.

3, Have your spouse buy you out

If you think you will be comfortable in new surroundings, you have the opportunity to start again with cash in your pocket. However, be aware that the current home should be refinanced in your spouse's name, as you won't have legal ownership and the liability could make qualifying for a new mortgage difficult.

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. A word of warning here, whilst this temporary situation means you and the children have no immediate relocation worries, there are pitfalls with this arrangement. For instance, if the market takes a nosedive you may still find yourself responsible for paying your ex their share at the market value as it was at the time of the divorce. Although it's difficult to part with the family home, I will say that it is much easier to move on emotionally when you no longer have any responsibilities or ties to your ex-spouse (other than the children of course!)

When you decide to sell

If you and your spouse do decide to sell your home, it will be beneficial to both of you to put aside your differences and work together to maximise your return. An agent can be extremely useful in this situation, helping you through the communication and negotiation process without necessarily having to talk to each other. However, both of you should sign the listing contract and the sales contract and both (albeit separately) be involved in the final negotiations.

You can use the proceeds from the sale to buy another home or you might want to rent for a while until the dust settles and you can think clearly about the direction in which you want your life to go. I know it seems like your life is over and there is no light at the end of the tunnel but believe me there is. You are about to embark on an exciting new journey which you can shape as you wish. Stay strong, get help and remember to engage a good real estate professional to help you through the home selling process.

Heather Chilvers is among Coldwell Banker Bermuda Realty's leading sales representatives. She has been working in real estate for 27 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. Read this article on Facebook: Ask Heather Real Estate

Emotional time: decisions about the marital home can be a tough after separation

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Published January 31, 2017 at 7:00 am (Updated January 31, 2017 at 5:52 am)

Your real estate options after divorce

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