Keeping the home in a “gray divorce” requires careful thought

Some people who divorce after they become “empty nesters” and are heading toward retirement use this as an opportunity to downsize into a smaller home, like a condo, townhome or even a residence in a retirement community. The proceeds from the sale of a single-family home (particularly one that’s significantly increased in value since it was purchased) can help divorcing spouses start this new phase of their life on a sound financial footing.

Others involved in what’s often called “gray divorce” are determined not to part with the family home – particularly if the mortgage is paid off. The home may carry too many memories to leave behind. They may have close ties to the neighborhood and community. If their soon-to-be ex also wants the home, they may see the fight for the home as a battle they need to “win.”

Does it make financial sense?

If you believe that keeping the home in your divorce is what’s best (for any of these reasons or others), it’s smart to at least consider how wise that is from a financial standpoint. 

Remember that home ownership, even without a mortgage, can be costly. You’ll still have to cover property taxes, insurance, HOA dues, maintenance and utilities. One certified divorce financial analyst (CDFA) advises, “If a home is going to be more than 70 percent of your net worth, you should consider whether you can really afford it.”

It’s crucial to factor all of these home ownership expenses into your budget and determine whether your income (potentially but not definitely including spousal support) will cover them. If you plan to retire soon, you’ll want to look at what your income (including Social Security retirement benefits and retirement account distributions) will look like. Remember too that under Texas’ community property laws, you’ll likely need to pay your spouse roughly half of the current value for their “share.”

As with many decisions that need to be made during divorce, determining whether to keep or even fight for the family home is both an emotional and financial one. Unfortunately, emotional attachments too often outweigh practical financial ones. By having sound legal and financial guidance, you are better equipped to make a decision that will serve you well in the long run.