A friend who divorced a year ago is scared and it's true home ownership and divorce usually bode change. Jen is scared that after a year of emotional turmoil for herself and her children, they're now going to lose their house. It's hard to stand on the sidelines and offer encouragement that everything will work out okay, especially when you haven't been through a similar experience.
Being at a loss for words, it made me wonder how home ownership and divorce fit together?
My goal here, at least not today, isn't to address any of the legal or real estate questions that come up around this topic. What I want to explore is whether the advice I'd like to give is sound. If I can honestly tell my friend that there are many good aspects to selling your house and rather than focus on what's bad about home ownership and divorce, why not focus on the benefits?
Home Ownership and Divorce – What's Next?
There's a reason both adults in a family work today. They need both incomes to support their chosen lifestyle. Finances usually drive the sale of the family home because one spouse, usually the mother can't afford the mortgage payments on their own (we'll skip the need for one spouse to buy out the owner's equity of the other spouse).
Sadly it didn't take long to think through the options and identify one or more friends who've experience each of these home ownership and divorce scenarios.
- Renting – for many women, may be the only option, made more difficult with children who must changes schools.
- Buying down – is an option for women where there's enough equity in the home and/or marriage so the woman can buy a new, but smaller home.
- Remaining in your home – with the woman assuming ownership probably happens most often when the house is paid off. According to Lawyers.com, it's also common for the mother and children to remain in their home until the children finish school
Home Ownership and Divorce – Renting Pros & Cons
Katie has been divorced for 5 years and has custody of her daughter. She feels very lucky with her rentals and said “… her landlord is like a husband but you only see him when you want him to repair something”.
What choices did Katie have? Katie who was a realtor knew that the house was too big (4,000 sq ft), too expensive and too much to manage by herself. She explored finishing the basement to rent to college students but in the end sold the house at the worst time (2007) and had no option to buy another house as they were “upside down” so there was no equity for a down payment.
What are the benefits of renting? Katie loves that when there's any type of problem, all she has to do is make a phone call to the landlord and they even plow her driveway in the winter. She also likes that she got a new start with a new community, new social life and a network of people that support her and her daughter.
For Katie who is pretty self-sufficient, she said “… it's great not owning a house, and she enjoys the peace of mind knowing she doesn't have to handle any maintenance or repairs for her home“.
Home Ownership and Divorce – Downsizing Benefits
Jennifer has also been divorced about 5 years, and has custody of her daughter who is 9 years old. She was able to buy a smaller home, and while it was stressful because of her budget, she ultimately got the house she fell in love with.
What choices did Jennifer have? She knew she couldn't afford to keep her home financially, and too big a challenge to maintain. She also felt is was too big a home for just she and her daughter. Jennifer bought a two bedroom home because she felt it was a better investment financially … and now wishes she had purchased a condo so she didn't have to deal with exterior maintenance.
What are the benefits of owning her own house? Jennifer likes her town, the schools for her daughter and she is thrilled to now live closer to the action where before she felt somewhat isolated.
Jennifer enjoys her smaller house because it's cozy and more personal than her larger home. She also loves that the house is “all mine, and being able to make her own decisions about the house“.
Home Ownership and Divorce – Staying in Her Home
Unlike the women above, Kathy's son has finished college and he's living on his own. That doesn't mean her home is any less important, it's just the the concerns and decisions are different. Kathy now has to rethink her retirement strategy and wonders if she'll want to move near her son in the future.
What choices did Kathy have? Once the reality of a divorce became real, Kathy started looking at smaller homes because she didn't think should could afford to stay in her 4 bedroom house. The house is paid off so there are property taxes, insurance and maintenance costs but no mortgage and as the divorce process identified family assets, Kathy learned she would be able to stay in her home.
What are the benefits of staying in her house? Kathy feels that “… with everything else changing in her life, being able to stay in her home is the one constant she has”. She still has good memories of raising her son in the house, likes her neighbors and her friends and church are nearby.
Kathy also recognizes that as she creates her new life, she might want to move to pursue other dreams (she's just signed up to take classes at a local college) and possibly move to be closer to her son … and one day, grandchildren.
My hope is these short stories show that while it's difficult working your way through the divorce process, a better lifestyle is possible after you sell your house and move. In fact Katie may never buy another house and Jennifer's tip is a condo can significantly reduce your home ownership responsibilities with respect to exterior maintenance.
Wishing women and friends that support them, the best of luck.
You will survive the challenges of home ownership and divorce!
I’m in similar boat as the divorcee who now rents. I do love my rental and have a great LL who is very responsive. What I fear is the future, rents increasing beyond my comfort level. I’m torn. I want my own home but being single I’m afraid of the upkeep that comes with it. As a renter, I am amazed at how much I can save. I know that will not be the case as a homeowner. But I feel owning gives me more stability down the road once its paid off. I think age is also a factor as I’m approaching mid 40’s. I don’t want a 30 year mortgage at this age but if something happened, swinging a shorter term mortgage could be difficult. Then there is interest rates to consider.
I don’t know what the right thing to do is.
Linda, You are correct that owning your home provides stability over renting or having to move when an owner decides to sell.
Condos are a nice compromise as the condo association will take care of most exterior maintenance and repairs (always debates about doors & windows).
I agree with your discomfort about getting a mortgage for less than 30 years because you can’t lower your monthly payment. However, there is a way to finish paying off a 30 year mortgage in 15 years or whatever length of time you need. You are able to add an extra principal payment to your monthly mortgage payment & pay down the balance faster which is all a 15 year mortgage does. The difference is you can stop this “extra principal” payment if you have a cash flow problem.
Hope that helps & watch for my upcoming webinar on home maintenance (just sign up for free report & you’ll get my newsletter), to learn more about how you can manage the home you will own one day.
Thanks Tina. I am considering the 30 yr mortgage and paying down extra. I was hoping to take on a 20 yr and pay that down sooner. I am planning to purchase below my means and pay it off early regardless of what term length. But the 30 year would just give me that much more cushion in case of hardships. Its the interest rates that bug me, I would need to calc out the difference in what I would pay at the 20 yr interest rate vs 30 yr with an accelerated pay down for both. If the extra interest is within an acceptable amount (acceptable amount to pay more in exchange for the peace of mind for the lower obligation), I may do the 30 year. I am also trying to factor in what I could accomplish with the extra money that isn’t going into the mortgage with the longer term in regards to 401k savings or other investments for retirement. So many things to think about.
Linda, You’re doing the RIGHT thing by thinking through (and analyzing) all your options. That’s great because whichever way you ultimately go, you’ll know why it’s right and how it will benefit you. With the interest rates so low, I haven’t found a huge difference in rates between 30 and 15 year mortgages. While there are other more sophisticated things you can do, I draw the line when things can’t be put on autopilot because I don’t have time to babysit or worry about the details – I prefer to use my time for the upfront research to make the best decision, and then move to my next project.
PS Sending you an email to see if you’d be willing to share your story about finance options, as you’re learning so much & I want to use homeowner stories like yours to help women learn they can do it!
Hi, Tina, I am happy to share my story/situation. What would you need from me?