I want to keep the house but I’m afraid I won’t be able to afford it over the long term. How can I be sure?

Your home is often the largest marital asset. It is also the most difficult to divide. It is natural to want to keep the home. After all, home is where the heart is, and it is also the place that people feel most secure. But before you decide keep it, be sure that you are thinking clearly on the subject, and wanting to keep it for the right reasons. Here are a few of the wrong reasons: 

The Marriage Museum

Some people want to keep the property because it embodies all the dreams they had for the marriage. They don’t want to let those dreams go, but they can’t hold onto the marriage, so they hold onto the house instead.

Familiarity Breeds Content

Though your home is familiar to you, that isn’t always a good thing. Your home may not be the best fit for your new life, so think critically about your anticipated new lifestyle after divorce and make sure that your current home makes the most sense for you and your family.

The Fix-Up Blues

As a marriage deteriorates, often the house does too. Many people list all the deferred maintenance that needs to be done to get the home into shape to sell, and then conclude that they can’t afford the repairs, so they need to keep the house instead. But those repairs will have to be done sometime, so keeping the house will only make them more costly down the line.

Immovable Children

Many people don’t want to uproot their children in a divorce, and that is understandable. But if the home is too expensive or cumbersome to maintain as a single parent, your children are going to suffer from lack of attention as you struggle to keep up the payments and repairs.

Once you have carefully examined your motives, you may decide that keeping the house is still the sensible thing to do. But can you afford the costs associated with it? Be sure to consider the cost of maintenance, repairs, homeowner’s association fees, gardeners, and other household expenses. Although you may be able to afford the mortgage, the other expenses may break your budget.

Where will you get the funds to buy your spouse out of his portion?  If you are going to refinance the house, will you be able to afford the payments? Many people opt for some creative financing methods to lower the payment, choosing to pay interest only, which is sort of like renting from the mortgage company, since you aren’t building up equity through mortgage principal pay down. Worse yet, some choose negative amortization, where they aren’t even paying the interest in full each month. The unpaid interest is added to the principal balance of the mortgage, which increases the interest the next month while eating up the equity in the home. This may work if you are going to be living in the house just a few more years before you sell. But these creative financing methods won’t stand the test of time, so if you plan to stay in the home a long time, make sure that you can afford more conventional 30-year loan amortization payments.

If you plan allow your spouse to keep retirement assets in trade for you keeping the home, figure out how you are going to build up your retirement assets to a sufficient amount to fund your own retirement. If you plan to fund your retirement by selling the home, remember that you will be paying all the costs of sale and capital gains taxes yourself, and that a portion of the remaining funds will be needed to buy a new home. You may anticipate your home going up in value, but remember that the new home you intend to buy will have gone up in cost as well.

And finally, be sure that you can afford the capital gains tax when you sell. You can exclude up to $250,000 of capital gain when you sell your primary residence if you’ve lived there for two of the five years before sale. If your home has gone up more than $250,000, you may want to sell while both spouses’ names are on title, so that you can together exclude up the $500,000 of gain.

As a nationally recognized expert on money, Ginita Wall is is the author of eight personal-finance books, including It’s More Than Money, It’s Your Life! The New Money Club for Women. Ginita lectures frequently and has appeared in numerous financial publications, websites, and television shows. A San Diego CPA (Certified Public Accountant), CDS, and CFP® practitioner specializing in divorce, she’s the co-founder of the Women’s Institute for Financial Education (www.WIFE.org). She can be reached at (858) 792-0524. View her website online.