5 Hidden Costs of Keeping the House After Divorce
Sandy Arons, MBA
- House appraisal minus mortgage balance does not = equity to be divided between spouses. Does your house need repairs? Have a home inspection prior to signing the divorce papers to determine if expensive repairs are necessary now or are likely in the future. Many home inspections do not include the HVAC and this requires a separate inspection. Did you remember to subtract the projected expenses (painting/repairs etc.) needed to get the house ready to put on the market and closing costs from the value you assign the house?
- Under-estimating monthly expenses. If you want to stay in the marital home, you should consider more than just the mortgage, taxes and insurance expenses. Does your monthly budget include the cost to have the exterior of the house painted every 5 years, the deductible for your homeowner’s insurance, or the expense to remove a fallen tree? A complete household budget should have about 30 items and a family budget should have about 125 items. How many items are in your budget? If you underestimate your expenses and don’t ask for enough alimony, how will you pay your bills?
- Not budgeting for the unexpected. Include a contingency in your monthly budget for those unexpected bills. Have you considered getting a home warranty to cover large expenses? The most expensive and frequent house repairs include:
- Plumbing leaks
- Water heaters
- Foundation issues
- Termite damage
- Roof repairs
- Replacement of appliances
- Not performing a timely title search. Has your ex-spouse borrowed against the Home Equity Line of Credit (HELOC) while you were going through the divorce process? Are you sure? A $60 investment in a proper title search can save you tens of thousands of dollars.
- Unpaid property taxes. Have property taxes been paid for the current year? If you keep the house and don’t address this issue before the divorce papers are signed, you could get stuck paying for the whole year of taxes. Is that in your budget?
Divorce is the 4th most frequent reason cited for bankruptcy in this country. Additionally, divorce and home foreclosure can occur in rapid succession. Don’t become a statistic. We encourage our clients to understand the numbers before they sign their final divorce paperwork. You have one chance to get it right and secure your future and your children’s future. Don’t just get a divorce. Get a financially smart divorce.
Sandy Arons, MBA
President, Arons & Associates Divorce Planning
Certified Divorce Financial Analyst
Certified Financial Divorce Practitioner
Financial Counselor & Mediator