The end of a relationship is understandably an emotional and traumatic time, and the process of separating your lives, property and finances can be challenging. As your income and expenses are likely to change at this time, it’s important you understand the impact of these changes on your most important asset: your family home.
What are my options?
In a divorce or separation, the family home as a major asset is usually divided up. One spouse may continue to live in the home – as is often the case when there are children involved – while the other rents or buys a new property. This may require the remaining spouse to buy out the other’s share in the property or offset assets – e.g. superannuation – against the value of the family home to even up the distribution of assets.
If both parties are unable to come to an agreement, the family home will need to be sold and the sale price less any mortgage costs is then split between the couple.
Should you keep your home?
In some instances, it makes good sense to keep the family home. It provides children with some form of stability in what is usually an unsettling time, and it gives the couple separating time to get through the divorce or separation and then make rational decisions once they’ve had a chance to settle into their new lives.
When deciding whether or not to keep your family home, it’s important you determine that you can actually afford it. If you originally bought your home using two incomes, maintaining your mortgage repayments – along with insurance, regular maintenance and monthly household expenses – on a single income can be tough.
If your property is in both of your names, you’ll need to come to an agreement with your spouse around their share of the property’s equity. You may need to refinance your mortgage to buy out their half of the property, in which case your bank or lender will want to check that you can actually afford the mortgage repayments and undertake a professional appraisal of your property’s value. Equity is then calculated as your home’s value less any mortgage costs still owing.
Should you sell your home?
If you can’t come to a mutual agreement around the splitting of your family home, selling your home makes more sense. Or you may agree to hold onto the home for a period of time – for example, if a child is partway through high school and you want to avoid any disruptions – and then sell at a later date.
It’s important to note that if the home is jointly owned, it cannot be listed for sale or sold without both spouse’s agreement.
Often couples choose to sell the home, seeing it as a way to close off a chapter and start afresh. Selling also means you have a sound financial base from which to start your new journey.
Decide on the best financial path
If you and your partner are considering separating, it’s important you seek sound financial advice around the splitting up of your important assets. Talk to a Mortgage Express broker/adviser about refinancing your mortgage to cover the cost of buying out your spouse or about financing your new home.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.
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