by Maria P. Imbalzano, Esq.
I have found in my many years of practicing law, that the parent of primary residence for the children (many times the mother) would like to stay in the marital home after a divorce. Their rationale is that it would provide a stable environment for the children, who are already going through upheaval due to the divorce. The parent wants to keep the children near their friends, in the same school district as before, and in their same bedrooms. While all of this makes emotional sense, it may or may not make financial sense.
In order for one party to stay in the marital home, that party would not only have to buy out the other party’s net equity in the home, but would also have to refinance the mortgage and any home equity loan. Refinance is necessary to remove the non-owning spouse’s name from the obligations. If you add to the mortgage the amount you need to buy out your spouse’s interest, you are generally doubling the amount owed, thereby increasing your monthly mortgage obligation. There are strict financial standards one must meet in order to obtain a mortgage and you would be wise to check with a bank or other financial institution to see if you would qualify for a mortgage based on your income and other debt. While alimony and child support can be considered as income when applying for a mortgage, you must have been receiving those payments for a certain period of time before they will be considered in the calculus.
If you qualify to refinance the mortgage/home equity loan, you will want to assure yourself that you will be able to afford not only some luxuries, such as vacations and entertainment, but the basic expenses of running a home, so you are not house rich and cash poor.
If you are keeping the house to presumably make the children happy, you will want to make sure there is enough money in your monthly budget to allow the children to go to movies with their friends, or buy the newest sneakers or jacket or jeans. And, of course, you will want to go out once in a while, too. It is important to budget for restaurants, clothing, birthday and holiday gifts and a myriad of other expenses, not to mention a slush fund in the event you need a new roof or heating/air conditioning unit.
If, during the marriage, your spouse mowed the lawn, shoveled the snow and cleaned the pool, and those are not tasks you are willing or able to take on, you will have to include the costs of hiring someone for those jobs in your budget. A frank and honest delineation of shelter, transportation and personal expenses on the budget pages of the Case Information Statement that you are asked to prepare during your divorce case is of utmost importance.
Other considerations revolve around a future sale of the house. Once the house is in your name alone, you are responsible for all major and minor repairs in order to keep the house in good condition for re-sale, as well as the real estate commissions, costs of sale, and possibly capital gains tax. If you had sold the house as part of your divorce settlement while both you and your spouse owned it, all of those costs would have been shared.
While this is not an easy decision to make, and many times it is made for emotional reasons, it should be made with your eyes wide open and staring at your monthly budget pages.
Maria P. Imbalzano is a shareholder and member of Stark & Stark’s Divorce Group. www.stark-stark.com.