Should you keep the family home after divorce?

You’re in the middle of negotiations with your spouse about dividing the family assets, and you’ve been offered the marital home as part of the settlement. While initially it may seem like a good idea to take ownership, you should carefully consider your financial position before making a decision. You should evaluate whether it’s best for you to stay in the home, sell it or negotiate another family asset in exchange for its value. Here are some of the key considerations when deciding if you should keep the house in a divorce.

Three important questions to ask yourself

1. Can I afford to keep living in the home after the divorce, bearing the expenses of home ownership on a single rather than a joint income?

2. Would I have to refinance the mortgage using a reduced income profile?

3. Are children involved, and is it in their best interest to stay in the home to complete school?

Post-divorce budgeting: Can you manage the home on one income?

Your first step is to prepare a budget. Affordability will likely be a leading factor in your decision, and this will allow you to determine if you can financially take on the responsibility of owning the home by yourself.

First, you need to determine your total income. Income sources may include employment, spousal support, investments and any money you’ll receive from the division of family property. Depending on your age, your income may also include Canada Pension Plan (CPP) (or Quebec Pension Plan (QPP)) and Old Age Security (OAS) payments and private pensions.

Next, consider all the expenses that come with owning the house. Expenses typically associated with home ownership include mortgage payments, property taxes, utilities (which include heat, electricity, cable and internet), routine home maintenance costs and home insurance premiums. If you live in a condo, you may also be subject to condo fees. Keep in mind that these are just the expenses related to the home, and you’ll also have to budget for your other monthly costs, such as groceries, gas, childcare and any other expenses you might incur.

Now that you’ve pinned down your total income and home expenses, you can evaluate whether you can independently cover the costs that come with owning the home.

How divorce affects children: Staying vs. moving homes

Leaving the marital home during the divorce process can pose challenges when it comes to custody and access matters, according to family lawyers. Once a parent leaves the family home, with the other parent remaining in the home with the children, it can be difficult to maintain months later in court that there should be a joint custody arrangement. For that reason, some divorcing parents will take turns staying in the home with the children.

You should also take into account what your plans are for saving for your children’s education. The marital home’s future value may provide a means of funding that education, and the money from its sale can be invested in a Registered Education Savings Plan (RESP). On the other hand, the cost of maintaining the home could become more expensive than anticipated, meaning there will be less money to put toward your child’s tuition fees and living costs. Keeping the home may seem like a good idea when real estate values are rising, but what happens if prices plateau or even fall? It may be a good idea to determine the value of your home before making any decisions.

If your kids are still in school, you may want to consider the implications of moving them to a new school district. Staying in the home means that your children can continue to attend their current school (and maintain their friendships), which can help provide some normalcy while navigating the changing dynamics of divorce. Depending on the circumstances, waiting to sell the home until they go off to university, or move from elementary to secondary school, might be preferable for your family.

Why giving up the family home in divorce could make financial sense

Although there may be justifications for you to keep the marital home in a divorce, there are also some reasons you may not want to take ownership of the property. Relinquishing a claim to the house could prove to be the best decision if other family assets given in exchange are more liquid, giving you more flexibility when it comes to making decisions about where to live, providing for your children and even making choices about a future career. There may also be memories from your marriage attached to the home, and moving out might provide you with the clean break you need post-divorce.

Working with your financial advisor can help

Navigating the financial implications of divorce is complex, especially when it involves major assets like a family home. A financial advisor can help you assess your full financial picture, explore the trade-offs of different settlement options and build a plan that reflects your long-term goals.