Divorce brings many emotional and financial challenges, and one of the biggest decisions is whether to keep the family home or sell it and split the money. This decision can be complicated and may have lasting effects on your financial stability, emotional well-being, and family life. If you’re navigating a divorce in Oregon, understanding the pros and cons of each option can help you make an informed decision that best suits your future needs.
Understanding the Financial Implications
When deciding whether to keep the house or split the money, the financial implications are at the forefront. Here’s a breakdown of what you should consider:
1. Ongoing Costs of Homeownership
Homeownership comes with ongoing costs, including mortgage payments, property taxes, insurance, and maintenance. Even if you have the financial means to buy out your spouse’s share of the home, you need to ensure that you can afford these long-term expenses on your own.
2. Equity and Liquidity
Your home’s equity—its market value minus any outstanding mortgage—can represent a significant portion of your marital assets. If you choose to keep the house, you may need to buy out your spouse’s share, which could require taking on additional debt or using other assets. While owning the house might give you valuable equity, that equity is tied up in the property, and you may not be able to access it easily.
On the other hand, if you sell the house and split the proceeds, you will have liquid cash that can be used for other expenses, such as finding a new home, investing, or covering living costs as you adjust to life post-divorce.
3. Capital Gains Tax
Another factor to consider is capital gains tax. In Oregon, when selling a home, you may be subject to capital gains taxes if the property has appreciated significantly. However, the IRS offers an exclusion for primary residences, allowing up to $250,000 in capital gains for single filers or $500,000 for joint filers to be excluded. If you and your spouse sell the house together, you may be able to take advantage of this exclusion. If you keep the house and later sell it on your own, your exclusion will be lower, and you could owe more in taxes.
4. Refinancing Challenges
If you plan to keep the house, you’ll likely need to refinance the mortgage in your name alone. This can be challenging if you do not have sufficient income or credit history. Lenders will carefully assess your ability to afford the mortgage, and refinancing can lead to higher interest rates depending on your financial situation.
5. The Oregon Housing Market
Oregon’s real estate market has been on an upward trend in recent years, especially in metropolitan areas like Portland. If home values continue to rise, keeping the house could provide long-term financial benefits, as the property might appreciate further. However, if the market takes a downturn, holding onto the house could become a financial burden if its value declines.
The Pros and Cons of Keeping the House
Choosing to keep the family home comes with both advantages and disadvantages, and it’s important to weigh them carefully.
Pros
- Stability for Children: If you have children, staying in the family home can provide a sense of stability and minimize disruption to their daily lives.
- Potential Appreciation: If the housing market continues to grow, the value of the home may increase over time, providing you with a valuable asset.
- Sentimental Value: Keeping the home may offer emotional comfort, particularly if you have strong ties to the property and the memories it holds.
Cons
- Financial Strain: Maintaining a home can be expensive, and covering the mortgage, taxes, and upkeep on a single income may be challenging.
- Lack of Liquidity: While the house represents a significant asset, it’s not easily convertible to cash. This could limit your financial flexibility after the divorce.
- Refinancing Hurdles: Refinancing the mortgage in your name alone can be difficult, and you may end up with higher interest rates.
The Pros and Cons of Splitting the Money
Opting to sell the home and split the proceeds has its own set of benefits and drawbacks.
Pros
- Immediate Financial Flexibility: Selling the house gives you immediate access to liquid assets that can be used to cover other living expenses, buy a new home, or invest in your future.
- Simplified Finances: By selling the house, you avoid the long-term costs and financial obligations of homeownership, which can simplify your financial picture post-divorce.
- Avoid Refinancing: You won’t have to go through the often complicated and expensive process of refinancing the mortgage in your name alone.
Cons
- Disruption for Children: Moving to a new home can be stressful for children and disrupt their sense of stability during an already emotional time.
- Loss of Appreciation Potential: If the real estate market continues to grow, selling the house now could mean missing out on future financial gains from the property’s appreciation.
A Case-by-Case Decision
Ultimately, the decision to keep the house or split the money depends on your specific circumstances. Here are a few questions to ask yourself when making this decision:
- Can I afford to maintain the house on my own, including the mortgage, taxes, and upkeep?
- What is the current state of the real estate market, and what is the potential for future appreciation?
- Would selling the house provide me with more financial flexibility during the divorce process?
- How would keeping or selling the house affect my children’s emotional well-being?
- What are the tax implications of keeping versus selling the house?
Working With an Oregon Family Law Attorney
Divorce is a complex process, and deciding what to do with your family home is just one piece of the puzzle. To ensure that your decision is the right one for both your financial and emotional future, it’s essential to work with a skilled family law attorney. At Regele Law, LLC, we understand the unique challenges that come with divorce and property division. Our team can help you evaluate your options, consider the financial and emotional factors involved, and make a decision that best suits your long-term goals. Contact us today to discuss your divorce and property division questions.
