For many people, the first question in divorce isn't, "How will we divide the retirement accounts?" It's, "Can I keep the house?"
A home is more than an asset. It's where birthdays were celebrated, children learned to ride bikes, holidays were hosted, and life happened. Wanting to keep it isn't just a financial decision. It's an emotional one. Sometimes keeping the house is absolutely the right decision. Sometimes it isn't.The challenge is knowing the difference.
One of the biggest misconceptions in divorce is that if a settlement is equal on paper, it will feel equal in real life. It doesn't always work that way. The balance sheet tells you what the assets are worth today, but it doesn't always tell you what they'll cost tomorrow.
One of the best ways to understand that is to look at the numbers.
Example (Illustrative Purposes Only)
Imagine a home worth $750,000 with a remaining mortgage of $250,000. That leaves $500,000 in equity. One spouse wants to keep the house, and instead of buying out the other spouse with cash, the other spouse receives $250,000 in retirement accounts and investments as part of the property division. On paper, the settlement looks perfectly equal.
But the spreadsheet only tells part of the story.
To keep the house, the spouse remaining in the home still has to refinance the existing mortgage into their own name. If the original loan carried an interest rate of 2.5% and today's rate is closer to 6.5%, the monthly mortgage payment increases by nearly $600 per month, or more than $7,000 per year, before property taxes, homeowners insurance, utilities, or maintenance are even considered.
Refinancing also comes with closing costs. Depending on the lender and loan, those costs often range from 2% to 5% of the mortgage amount.
Now imagine the plan is to keep the home until the children graduate. Five years later, it's time to sell.
A real estate commission of approximately 6% on a $750,000 home is $45,000. Seller closing costs reduce the proceeds even further. Many homeowners also spend thousands of dollars preparing the home for sale by painting, making repairs, replacing flooring, landscaping, or addressing issues identified during the buyer's inspection.
Depending on how much the home has appreciated and how long it has been owned, there may also be capital gains tax considerations. Under current federal tax law, many married couples who qualify may exclude up to $500,000 of capital gain on the sale of a primary residence, while many single taxpayers qualify for an exclusion of up to $250,000. Every situation is different, but it's another factor worth considering before deciding to keep the home.
None of this means keeping the house is the wrong decision. Home is more than an investment. It's where your children sleep, where traditions continue, and where life can feel familiar during an otherwise uncertain time. Those things have value, and not every important decision can be measured on a spreadsheet.
The key is making the decision with complete information.
A Certified Divorce Financial Analyst® can run this type of analysis using your actual numbers. Instead of relying on assumptions, a CDFA® professional can model different scenarios based on your mortgage, your income, your settlement options, and your long-term financial goals. What happens if you keep the house for five years? What if you sell now? What if you wait until the children graduate? How does each option affect your retirement, your monthly cash flow, and your overall financial security?
That's what divorce financial analysis is all about.
It's understanding your options before you choose one. It's seeing the full financial picture, not just next month's mortgage payment, but the overall financial impact of keeping the home for years to come.
Maybe, after reviewing all of the numbers, you still decide to keep the house. The analysis isn't designed to talk you out of it. It's designed to make sure you understand exactly what you're saying yes to.
Most parents want to minimize disruption for their children, and keeping the family home may help provide that stability. But it's also worth considering whether stretching your finances to the breaking point creates a different kind of disruption. Financial stress affects the entire household. A parent who is constantly worried about making the mortgage payment may not be providing the stability they hoped to preserve.
The best decisions aren't purely emotional, and they aren't purely financial.
They're informed.
Before You Go...
One Thing to Think About
Before making any major financial decision during your divorce, ask yourself:
"Am I making this decision because I understand the numbers, or because I'm hoping the numbers will work out?"