Getting a divorce? Think about the house

My husband and I have an agreement: If either one of us is unfaithful to our marriage vows that person walks away with nothing. Absolutely nothing. No car, no kids, no house. Nada. And yes: we shook on it. We also meant it and, despite how ridiculous this gentleman’s agreement may appear to be, we share this story with family and friends, with full knowledge that our handshake would never stand up in a court of law, if it came to that.

But in era where almost half of marriages end in divorce, it was our way of trying, in a humourous way, to acknowledge that divorce and property is a messy business.

The best solution is, obviously, not to get divorced. But if separation is imminent in your life you may be curious as to how a family break up with impact the marital home.

There are three basic scenarios as to what can happen to your marital home.

Sole possession. This is when one partner opts to buy out the other partner. Often a paid appraisal is conducted, which provides a current or fair market value of the home. Then the spouse who wants to continue living in the home can obtain refinancing, which will pay the other person half of what the home is worth.

Co-ownership. This is typically only undertaken by partners who are going through an amicable divorce, as it means that both are responsible for payments and both are entitled to half the funds when the property is sold. The difficult component of this type of ownership, however, is that both people would be responsible for capital gains on their share of the profit. The spouse that remained living in the home, however, may be able to claim an exemption. Speak to a lawyer for more information on this option.

Sell. While it’s tough to uproot you and/or your family, selling can often be the easiest solution. By selling the marital home, both people are able to take their entitled portion of the sale and then able to pursue their own home ownership needs. Problems can arise, however, if the market is soft and you cannot get a good sale price for the home.

Regardless of what you and your former spouse decides to do with the home, you’ll want to consider the following:

• Business as usual until there’s a settlement: Regardless of how bitter a divorce may become, it’s important to continue paying mortgage, property taxes and bills, at least until a settlement has been reached. Refusing to pay common debts will only hurt your future chances of refinancing and home ownership. If you find your partner is unwilling to help with the payments, simply keep receipts. Then use these receipts to seek reimbursement during the settlement process.
• Separate your finances: As fast as possible, seek to separate your finances from your partner so you can start establishing good credit on your own. That may mean opening a separate bank account, or getting your own credit card.
• Expediency is key: The sooner your divorce is finalized, the better you’ll be financially. That’s because mortgage professionals and other finance advisers may be unable to help you rebuild or move on until the settlement is signed and delivered.