Divorce is undoubtedly a financial transformation as well as an emotional one. This article will guide you through the critical housing alternatives and tackle the big financial questions that you need to solve after divorce.
Divorce can bring a whirlwind of emotions and decisions, including the challenging choice of where to live during and after the proceedings. You may consider whether to hold onto the family home or to make a fresh start elsewhere. However prematurely leaving your home can be one of the biggest missteps during a divorce.
Should I leave the family home
Vacating the family home relinquishes any immediate control you have over the residence. This house, filled with precious memories of your children growing up, will be subjected to your ex-spouse’s decisions. They may renovate, host late-night gatherings, or even introduce a new partner to the home. You’ll be powerless in influencing these changes.
Choosing to stay in your marital home, however, provides a sense of control and stability amid the turbulence of divorce. This consistency is often beneficial for your children, who are also navigating the changes in their lives. Plus, retaining this aspect of your pre-divorce life can offer a measure of comfort during this challenging period.
Own your home
Financial factors also play a crucial role. If you own your home outright or have substantial equity, it might be more beneficial to keep the family residence and find a smaller, rented accommodation for personal use. However, even if your financial situation is strained, we advocate finding a way to retain the family home over restarting in a new location. Therefore, if you’re undergoing a divorce, it’s essential to ponder your living arrangements post-divorce thoroughly and judiciously.”
After divorce
For most the house they own is the largest purchase of their lives, and can be their biggest asset, but also potentially your biggest liability. Making sound decisions on what you will do with your home after your divorce settlement is critical.
What changes to your lifestyle can you make?
If your income or joint income is now not enough to pay for the two of you to have the lifestyle you’re used to which is normal post-divorce, then it’s time to work out where you can both cut some costs. This is a sad but normal part of the process. Two households are more expensive than one. One of you may have to consider renting a home rather than buying and it may be impossible to maintain the family home. Be reasonable about this. Both you and your ex deserve a fresh start and a decent roof over your heads and your children deserve a decent place to live in AND to visit.
No-one wants to feel like they’ve had a raw deal or are making too many concessions, so at this point you may need some help in negotiating. If either of you are digging your heels in, it might be time to consider a mediator, who can steer you through the difficult decisions ahead. You can find a mediator by going HERE [www.resolution.org.uk/find_a_mediator].
Where am I going to live after divorce?
The main things you need to work out are where you (and if applicable your children) are going to live and what you can afford given that you may not have the income that is coming in now.
Some questions to ask yourself are:
- Can you could afford the mortgage/ rent on your current house on your own?
- Do you need to sell the house to split the equity between you?
- How much is it worth? Would there be mortgage penalties?
- Can you raise a mortgage on your own?
- Could your ex?
- How much would a new house cost?
- Will you have to move in order to afford somewhere suitable on a lower income?
- Could you sell some other assets in order to afford accommodation?
Don’t forget that your ex also needs to be able to afford to live after divorce. If you are parents, then even if one of you is main custodian of the children, the other parent will need room for the kids to come and visit/ sleep over.
Critical home decisions
You and your ex will need to reach a critical conclusion on your marital home. There are several options, some will be more viable to you and your situation than others;
1: Post-Divorce Stay
Retaining your current home is the first housing option after a divorce. Your home typically represents a significant asset, and in some cases, a substantial liability. It is essential to weigh certain factors before deciding to hold onto your property.
The initial step involves understanding your motivation behind retaining the house. Many individuals prefer to maintain stability for their children, given the home’s proximity to a preferred school district or the children’s friends.
Critical factors to consider if you wish to stay in your marital home
Deciding to stay in the house out of revenge isn’t the best strategy and may well hurt yourself in the process (although many choose to take this route whilst in a highly emotional state following divorce). You need to evaluate whether the house will be appropriate in size for your post-divorce needs. It could be too big or too small, so anticipate these changes.
Financial feasibility
Financial feasibility is another critical factor. You will be solely responsible for all house-related expenses including the mortgage, property taxes, Homeowner Association (HOA) fees, insurance, and maintenance costs. Understand your usual monthly expenses and factor them into your budget.
Additionally, consider the cost of tasks previously handled by your ex-spouse, these might include childcare, garden maintenance, house cleaning, cooking or home repairs. These costs should be considered for in your budget.
Final consideration
The final consideration involves your financial capability to manage the mortgage alone. Your credit score and financial circumstances are likely to change post-divorce, potentially affecting your lending approval. If your debt-to-income ratio is high, refinancing your mortgage might be necessary. A quick claim deed can remove your ex-spouse from the title. If qualifying for a mortgage on your single income becomes an issue, consider lining up a potential co-signer.
Before engaging in a tug-of-war over home ownership after divorce, ensure you are fully prepared and informed about how to effectively manage this responsibility.
Stay Pros:
- Minimal disruption to lifestyle
- Minimal disruption to children
Stay Cons:
- May not be affordable
- Delaying your divorce transition
2: Post-Divorce Buy
The second option you can explore after a divorce is buying a new home. This might provide a fresh start both financially and psychologically, potentially offering a space that better suits your needs. Purchasing a less expensive house than your marital home can result in a lower mortgage payment. Similarly, excellent credit could mean qualifying for a lower interest rate. This transition also opens up opportunities to move closer to your support network, including parents, siblings, and friends.
Important aspects to consider when buying a new house after divorce
Despite several advantages, purchasing a new house involves substantial upfront costs such as the down payment and closing costs. Typically, lenders might offer houses with a 5% down payment, where possible paying a 20% down payment may avoid mortgage insurance costs which offer limited benefit.
Moving budget
Remember to budget for moving expenses, new furniture, and potential immediate modifications or repairs in the new house. Small home improvements can quickly so be realistic and add budget these items accordingly.
It is of paramount importance to re-evaluate your cash flow and other financial obligations after divorce before deciding on this option. Only proceed if purchasing a new house post-divorce aligns with your financial capabilities and long-term objectives. Be careful not to over-stretch inan effort to maintain a lifestyle you were use to, but cannot viably sustain.
Buy Pros
- Fresh start
- Select a property that matches your new situation
Buy Cons
- Purchasing a property can be stressful
- House purchasing costs
3: Post-Divorce Rent
Renting a home can be an appealing choice for many. Renting allows for enhanced flexibility, providing an opportunity to adjust to your new circumstances without the commitment of property ownership. Whether you rent temporarily or for a more extended period, it provides time to envision your future life and to avoid rushing into a property purchase that may not serve your needs in a year or two following divorce.
A significant advantage of renting is that it absolves you from many homeownership responsibilities, including property maintenance and upkeep. Although some perceive renting as costlier because monthly rental payments can exceed mortgage payments, remember that as a renter, you are not responsible for property taxes, maintenance, and other homeowner expenses.
The flexibility that renting provides can be a valuable asset in a post-divorce situation. Allowing you to delay critical decisions for a later date that may be effected by other influences that are unknown at present. If you need to restart or accelerate your career that may location consequences that renting can accommodate in a way that home ownership cannot. Renting in the short-term may also allow you to sell at a more opportune time to maximise any benefit from house-prices.
Rent Pros
- Maximum flexibility
- Reduced commitment
Rent Cons
- May not be best long term solution
- Instability long-term
- May not have facilities needed for children’s visits / stays
4: Post-Divorce Bird-nesting
Named as such because nestlings remain in the nest (home) while the parents rotate. Instead of alternating children between parents’ residences, the children remain in the family home while the parents move in and out based on the agreed parenting schedule.
This option has seen significant growth in recent years. However, it may not be the right fit for all families.
Here’s how a basic bird’s nest arrangement functions:
- You occupy the family home after divorce during your scheduled parenting time while your ex-spouse resides elsewhere.
- When your parenting time concludes, you vacate the family home, and your ex-spouse moves in for their parenting duration.
- This rotation continues in accordance with the parenting plan.
- Typically an additional smaller abode is acquired after divorce which is similarly shared when either party is off-parenting’
In addition to offering consistency benefits for any children it may often be less expensive than traditional arrangements. This is due to the avoidance of maintaining two child-equipped households and frequent transportation. However, if parents opt for separate residences, the cost may increase. A second residence near the family home can reduce transportation expenses.
Bird-Nesting Custody and the Courts
Bird’s nest custody arrangements are typically mutually agreed upon by parents, after which they are submitted to the court as part of the child custody agreement. Although it’s rare for divorce courts to impose bird’s nest arrangements, a judge might order it if the traditional arrangement places undue burden on the children, serves as a temporary measure until the children reach adulthood, or is suitable for children with special needs.
Bird-nesting Pros
- Minimal disruption to lifestyle
- Minimal disruption to children
- May be more affordable solution
- Children have a stable consistent home they are familiar with
Bird-nesting Cons
- Neither parent has s stable consistent home
5: Post-Divorce Couch-surfing
You shouldn’t hastily move out of the marital home without a comprehensive divorce finance plan in place. Anticipate changes and prepare yourself to tackle them head-on because life, especially during divorce, is unpredictable.
If you have children, this period of uncertainty can be particularly hard on them. They will look to you for stability amidst the chaos, and providing them with an appropriate home is paramount. Couch-surfing isn’t going to assist this.
This means finding a safe and comfortable space for them, whether for regular visits or as a permanent residence. Making hasty decisions could jeopardize your ability to provide this necessary stability, so it’s crucial to stay in the marital home until you’ve established a solid financial plan and secured a suitable place for your children.
Couch-surfing Pros
- Get’s you out of the family home at earliest opportunity
Couch-surfing Cons
- Could count against you legally
- Unable living arrangements for you
- Not sustainable
Divorce finances – what can you afford
Transitioning from a dual to single income living post-divorce is challenging. This change demands substantial lifestyle adjustments, and without a well-thought-out strategy, the repercussions could be overwhelming. Therefore, it’s imperative to meticulously plan your finances before making any significant changes to your living arrangements. In any situation you will need to get the calculator out and start crunching some numbers.
What will I need for bills etc?
What money do you need over and above your accommodation costs? To answer this you need a good idea of how much you spend on utilities, phone, food etc. If you don’t know see our article on sorting out your finances here.
Think about what might be scaled back if you were to live in a smaller home or not supporting children full time. Other costs might go up e.g. childcare.
Calculate your living costs:
- Mortgage / rent payments
- Property taxes and/or Service costs
- Property maintenance
- Travel costs – these may change significantly if you previously shared a car, or moving to a new location.
- Childcare – which may go up considerably
- Note that some costs are not monthly, don’t neglect yearly costs
- Debt / Credit cards
- Bills
Will I need to go back to work?
If you’re not working at the moment, you may need to consider going back to work. If you are already at work, let payroll know you have separated or divorced as this may affect your tax code.
Calculate your income:
You may like to use the detailed wikidivorce calculator.
- Consider all sources of income
- Will you be eligible for benefits?
- Include spousal income
- Child support
- Financial support (if any)
- Pension
- Remember some forms of income won’t last forever (child support)
Tips for pensioners feeling the financial pinch
Here’s an article by our good friend Tom Philips at Equity Release Warehouse, providing solid suggestions for pensioners who are struggling with the financial pinch either caused by the change in living crisis, or other life events such as a divorce.
Charities that may be able to help:
If you’re not sure Turn2Us is a charity that helps people find out what they might be entitled to. Check out www.turn2us.org.uk. If you haven’t worked in a while, The National Careers Service can help you ease your way back in.
Conclusion
Divorce isn’t just a rollercoaster of feelings—it’s a financial dance too! We’ve taken you on a tour of the big questions that post-divorce life is likely to throw your way.
Divorce is the emotional whirlwind that brings a whole menu of decisions, including the real puzzler of where to hang your hat during and after the legal tango. Stick with the family nest or spread your wings elsewhere? But remember, skipping out on your old digs in a hurry can be like stepping on a banana peel in the divorce marathon!
So, while you’re surfing the waves of this transition, keep in mind that each choice you make packs an emotional and financial punch. By sizing up your housing options and giving those financial riddles a good-natured smack, you’re not just surviving, you’re thriving in the post-divorce adventure!
