If you kept the family home in the divorce, hopefully you did so with a full understanding of the entire housing circumstance. It is common tohave an emotional tie to a home for all kinds of reasons. If a decision was made based on emotion, you could have some blind spots in your understanding of some important factors. What is needed is complete clarity of the financial circumstance of owning the home. This way you can manage it as you would any other asset in your portfolio and make appropriate financial decisions for it in the future. After all, owning a home is one of the largest financial investments most of us make. There are three parts to consider in the housing circumstance.
The first part is to have an understanding of the total costs to own the home. In addition to the mortgage, there are property taxes, utilities, maintenance, repairs, insurance, perhaps homeowner association dues. You might have to pay a separate land fee in some cases. These expenses represent the total cost of owning the home. If you will receive child support for a few years, and rely on it in part for housing expenses, you could be faced with a hardship in the future and unable to afford to maintain the home at which time you might consider selling as an option.
Part two is an understanding of the tax base of the home. This was established when the property was purchased and includes the purchase price and some of the costs to acquire the property. Your tax base can increase with qualified capital improvements that add value to the property. Knowing the tax base will help you manage the taxable event upon sell and more specifically, if there is a gain on sale and the tax treatment of that gain. It would be advantages to glean an understanding of capital gains and qualifying for exclusions since being single and holding title as an unmarried woman changes the exemption amount. Equally upon re-marriage and joint ownership with a new spouse, the exemption could change again. A tax professional can assist you in this calculation.
Part three of the housing circumstance is to understand the loan that is currently on the property. Whether that loan be the original loanbefore divorce or a refinance loan in your name only. Is it a thirty year fixed rate loan or an adjustable loan? If adjustable, do you know when the adjustments occur and the potential increase in the interest rate that will change the payments? This could change the affordability factor in the future.
All the parts of the housing circumstance work together to manage the financial implications of owning the home. The last thing you want moving forward after divorce is unexpected financial surprises. Being truly empowered in your financial future depends on being well informed.