Archive for March, 2015

Is The Home Worth Keeping?

A house is not only the biggest asset for most families but it also carries a lot of memories, sentiment and connection to events and people where the marital family lived. Yet life is changing now and the house needs to be looked at differently. Here are four key questions to consider when thinking about keeping or selling the house:

First: Will you be able to afford the payments and can you refinance the mortgage to get your ex-spouse off the title?

If one person keeps that home the other will want to be off the title and off the mortgage. Refinancing a mortgage into one person’s name or the other is challenging. Lenders have different criteria for people living off of support payments and that have limited or insufficient personal credit.

Second: What about the costs of maintaining the property, even if you can afford the payments?

Beyond payments you have maintenance and repairs, property taxes and homeowners insurance. There may also be improvements that need to be made to the home. Kitchens do get outdated and some people cannot stand to live in an outdated environment. There is also the aspect of furniture. Half the furniture is probably gone with the other spouse. When children are involved, having two comfortable environments is important. That means two beds, two chest of drawers, two sets of toys, etc…

Third: What about the value of the home?

With house prices rising again, the ability to channel equity to other goals may be a better option than staying in the house. There are no guarantees that a real estate market will be good or remain good when you want to sell the house. Is it better to sell today or wait for a better market condition?

Fourth: Income taxes may impact your choice.

When a residence is sold, you can get up to $250,000 per person as tax-free capital gains from the property — $500,000 for a husband and wife or divorced couple when both names are on title. That gain is determined by taking the original cost of the home plus any big improvements (roofing, additions and major renovations) and subtracting that from the selling price. You can also deduct the cost of selling (commissions, fix-up items and closing costs to name a few) to see what your gain is. Any gain up to $250,000 per spouse is tax-free income. Anything over that is taxed as capital gains that may be a lower rate than your ordinary income taxes rate.

These are the basics you may want to think about before deciding about keeping the house.

 

By: Armand & Robbin D’Alo