The marital residence is an emotionally charged asset, and its disposition in a divorce often impairs good decision-making. Divorcing spouses, who sometimes fight tooth and nail to keep it, often do not realize that neither can afford it alone.
During the happier times of the marriage, the marital residence is called “the family home”; during a divorce, the home becomes “a house.”
Families fractured by divorce need to balance their needs and wants against the grim realities of life after divorce. Divorced spouses, particularly the wife, often cannot maintain the same level of living they enjoyed before. Staying put would be nice and comfortable – moving, even under the best conditions, is a hassle – however, it may not be possible or even realistic not to move.
In a divorce, no matter how attached a person is to the martial home, it’s imperative to have a realistic view about affording it. This means “throwing a cold eye ” – that, being able to see that what was a home yesterday is a house today. A person who gives up everything else in order to keep the house, may well find he or she cannot cover the mortgage, property taxes, and maintenance.
A financial advisor can do the sharp pencil work to determine whether, after the divorce, a person can meet the expenses of the home and still manage other financial needs (such as saving for retirement).
A house is a major cash expense (e.g., mortgage payments, property taxes, repairs, and utilities). The crash of the real estate market made it abundantly clear that homes have a very low return on investment and, in some cases, have a negative return. Many intact couples continue to struggle with underwater mortgages (those where the debt on the property is greater than its market value), and couples have walked away from distressed properties.
During divorce and settlement negotiations, the main focus should be improvement of finances by making certain that living expenses after the divorce and in retirement are manageable.