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Keeping the house in a divorce

When you're splitting up, your home is a refuge in a sea of uncertainty. Your kids are comfortable there, so you may yearn to hang onto that house after the divorce. But does it make financial sense?

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Like many other aspects of divorce, it depends. Weigh the expenses involved in keeping the house and what you may have to give up to get it against your desire for emotional stability for yourself and your kids.

Property division is one of the most important decisions during a split-up. "The property division in a divorce is final and you can't undo it even if you realize later that you made a mistake," says Carol Ann Wilson, a certified financial divorce practictioner and author of "The Financial Guide to Divorce Settlement." "Other areas of a divorce decree can be changed, such as child support or visitation, but not the property settlement."

While the property settlement is final, there is flexibility in crafting it. Options include co-ownership between you and your ex-spouse for a certain number of years, or taking sole possession and refinancing to keep mortgage payments reasonable.

The mortgage
Although the mortgage is by no means the only expense involved in keeping the house, it's a good place to start. With interest rates still fairly low, refinancing may be affordable and fairly painless. If you're dividing assets, you may be able to buy out your spouse's share of the equity and still keep your monthly payment affordable.

You must qualify for a mortgage with your own income, a combination of salary, alimony -- if you get any -- and child support. If you can't qualify for a new mortgage, another option would be co-ownership after the divorce is final. Under such an arrangement, you both continue to own the house, contributing jointly to pay the mortgage, taxes and upkeep.

"A lot of times people will co-own the house for two or three years with a drop-dead date by which time the house will either be placed for sale or one party will buy out the other party's interest," says Joan Coullahan, a certified divorce financial analyst in Vienna, Va. "In other cases, the partners in a joint ownership agreement will evaluate on a yearly basis whether they want to continue to co-own."

Co-ownership isn't for everyone: Some couples don't want to be tied to each other financially after a divorce. In some cases, there is so much animosity between the husband and wife that such a cooperative arrangement wouldn't work, Coullahan says. Also, if a spouse leaves his or her name on the mortgage, it may be difficult to qualify for another mortgage for a house of his or her own.

Upkeep costs
Besides the mortgage, include upkeep costs in your post-divorce budget. Write down all ongoing costs such as gas, electric, sewer and water bills. Don't forget outside maintenance such as snow removal and lawn upkeep.

In addition to the regular bills, budget for unexpected repairs and regular maintenance. You don't want to be caught short if you need a new water heater.

Katharina Gschwend, a certified divorce financial analyst in New Providence, N.J, recommends hiring a building inspector to evaluate the house and see if any major repairs are on the horizon.

Look at your own records to see what work you've already completed. Also, consider what work you haven't done to spot potential trouble spots. If, for example, the house is more than 20 years old and still has the original roof, add a new roof to your budget.

Taxes
Taxes are the last part of the affordability picture. "A lot of expenses are beyond your control, and taxes are one of those expenses," says Gschwend. "Expect that your property taxes will go up, because they usually do."

As property values rise in many areas of the country, taxes increase. Many state and county laws require periodic reassessments, which can significantly increase your tax bill, especially if you've improved the house or prices spike in your area.

 
 
Next: "If you really want to keep the house ..."
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