The family home is in most cases the largest family asset. What happens to the property when the family breaks down depends on the divorcing couple.
One of the most common estate planning mistakes that people make is joint ownership over the marital residence after divorce. This decision carries important risks of which neither party may be aware.
There are a few questions you need to ask yourself regarding the marital residence. The first is whether you would be able to keep up with the payments and maintenance of the property on your own? Do you have enough savings to buy your partner out? Are you able to qualify for a new loan to buy your partner’s part? Read this blog to learn all the pitfalls of keeping a house during a divorce in Longmont, CO.
As both former spouses are responsible for paying the entire mortgage, the entire amount of the mortgage will show up on both parties’ credit reports. For the spouse not living in the house, it could be difficult to qualify for a new mortgage due to the large debt already carried. In addition, a late mortgage payment by the occupying spouse will also hurt the other’s credit score furthermore the lender may exercise its right to collect from the co-signer.
Mortgage Interest Deduction
Who is going to take advantage of the mortgage interest deduction? If you have decided that you will pay equal amounts on the monthly mortgage, you will also have to decide which spouse will take the entire mortgage interest deduction.
You should also take into consideration that if you and your former partner will own the house for more than six years after the termination of marriage are at risk of losing the tax benefit of IRS 1041.
The next questions that you should sort out are: Who pays for the unforeseen expenses that will inevitably crop up when you own property? Who pays for roof repairs or to change the garage door if it breaks? Does the former partner still have to pay a portion of the repairs?
Have you decided how you will pay for the routine maintenance expenses? What happens if your child breaks a window by mistake? Who is going to pay for it?
Risks of Co-Ownership
The disadvantages can be pretty significant. Because you are both responsible for paying the entire mortgage, a credit report for either of you will show the entire amount of your mortgage. Having such a large debt on your record, especially if you are not living in the house anymore, can make it difficult to get credit for other purposes.
In case one of the spouses loses his/her job or is no longer able to pay his/hers portion of the mortgage, taxes, and utilities the responsibility of keeping the house current is solely on one party. If the employed spouse does pay the mortgage and the bills, when and how does she or he get reimbursed?
Another issue that could arise is what happens if one of the spouses passes away while still being co-owners. Each owner has the right to leave their shares at death to whomever they choose. Now you’re potentially a co-owner of a property with someone you don’t know/like.
Finally, what happens if one of the spouses is sued or files for bankruptcy? In either of these cases, the other spouse’s shares could be seized and possibly even result in a forced sale. There’s really no way to protect against this, so if you believe the risk is too high, don’t go the co-ownership route.
Sell Your House to a Cash Home Buyer In Longmont
Will any of these problems happen in your family? Hopefully not. But are you willing to take the risk? Nothing is better than a clean break. In an ideal world, after your divorce, you should not own any property, or have any debts, together.
According to financial studies, you will require more than a 30 percent increase in income just to maintain the standard of living you had before the divorce.
Considering all this, selling your house in Longmont and splitting the proceeds is probably the best route to take.
We understands that divorce is unpleasant enough without the burden of staging and selling a house in Longmont, so we make the selling process as swift and hassle-free as possible. Selling on the open market can delay your ability to find new accommodation and achieve closure. To ease the pain and help you get on with life, we, NoCo House Buyers Inc, can help you sell your house in Longmont quickly, close in as little as 9 days so you can get on with life.