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Keeping the Family Home

August 24, 2011

Keeping the family home is often a significant goal for a person who has separated. You may have a strong emotional attachment to the home, you may want your children to carry on living in the home,  the home may be close to your family and friends, you may just not want your ex to have it! Whatever your reasons for wanting to keep the home, be honest with yourself about them and about whether keeping the home is a sound financial decision.

If you want to keep the home, you should consider the following:

1.  What is your motivation for doing so? What other options would satisfy your reasons for staying in the home? You may be financially better off renting in the same area for a period of time. If you want stability for children, what other ways can you provide this?  How significant will your reasons for keeping the home be in 2 years? 10 years? This is a time to ask yourself difficult questions and to be open to all options. Do a cost/benefit analysis of all the options—you may be surprised at the outcome.

2.  Is keeping the home practically viable?  Will the home require more upkeep or maintenance than you can provide? That lifestyle block may have seemed your dream property when there were two of you to maintain it but it may quickly turn into a nightmare on your own. Does the home require repairs and renovations that are beyond your capabilities? If you have to return to work, is the home close enough to where you will be able to find work?

3.  Is keeping the home emotionally viable? Are you in the right emotional space to be able to live in a home that provides ongoing reminders of your relationship or marriage? Will staying in the home impede your ability to move on emotionally and psychologically?

4Is keeping the home financially viable? This often ends up being the deciding factor. To keep the home, you will usually have to raise sufficient money to repay any existing mortgage and buy out the other person’s interest in the home, taking into account how other assets and debts have been divided between you. Will the Bank lend you sufficient money to do this and will you be able to meet the repayments required?

Is your income stable and consistent enough to meet the repayments? Relying on child support or boarder income may prove unreliable and cause you problems in paying your mortgage repayments.

Be sure to factor in other payments you will need to make on your own if you take over the home—the rates, insurances and don’t forget the premiums for any life insurance the bank may require you to have as a condition of your mortgage.

The Bank will usually want you to complete a formal loan application in the same way it did when you first got a mortgage to buy the house with your ex-partner.

Since the global financial crisis, Banks have tightened their lending criteria. Some people find themselves in a home that is worth the same or less than they bought it for. As a result of these factors, we have found in some cases the Banks have refused to agree to the home being transferred to one party and to lend the mortgage to that person alone. Such situations require some good lateral thinking and problem solving by you and your lawyer.

Does your existing mortgage have penalty fees if you repay it now? Mortgages on a fixed rate are likely to incur penalties because this mortgage will be repaid from the new mortgage you borrow to buy your ex-partner out. If this is the case, you may be best to wait until the fixed term comes to an end before completing a buy-out of the family home.

Make your application to the Bank sooner, rather than later, if you think you want to keep the home. That way you will know early on whether it is possible and you won’t negotiate to keep the home only to find you cannot get the finance you need.

5.  What are the consequences if it all goes wrong?  If you keep the home and you find your circumstances change and you can’t afford it, what will happen? I got thinking about this blog topic after hearing of someone who fought hard to keep the family home after a separation, only to have to put it on the market for sale less than a year later because keeping the home had proven to be unaffordable. She is now in a worse financial position than she would have been in if the home had been sold as part of her relationship property settlement. If you end up having to refinance again or sell, the likely result is that it will cost you even more money—in refinancing costs or real estate agent’s commission and conveyancing costs. If you and your ex-partner sell the home on your separation, the costs of sale and commission are bourne equally by you both. Once you own the home yourself, those costs are yours alone to bear in the future.

Keeping the family home can be a sensible and appropriate decision for a lot of people. Just make sure you have done your homework, listened to professional advice and considered all the available options.

If you want  help with a family law issue, go to www.familylawresults.co.nz.

One Comment
  1. Stuart Mainwaring permalink

    In regards to the keeping the family home for the kids and ex wife. Everyone is telling me that she should be paying rent. Is that correct?

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