There are many reasons a spouse wants to stay in the home post divorce. From proximity to their children’s school or grandparents, to giving their children “stability,” soon to be divorcees may have already made up their minds to stay put. Especially in Colorado where the housing inventory is so low, finding a new place to live is a major undertaking. We caution clients to consider the practical and financial concerns of staying in the home. There are reasons to consider moving that may win out over stability, proximity and your or your child’s emotional attachment.
How old is the family home? Does the home's age mean you’ll need to make major repairs such as roof replacement, sewer system overhaul or foundation fixes? Unless you are a contractor, you will not be in a position to DIY these repairs.
Colorado is the second highest-rated state in the nation for homeowners insurance catastrophe claims. Our wacky weather includes hail storms, wildfires and heavy spring snowstorms. Homeowners with residences valued above 300kpay on average around $4,000 a year for homeowner’s insurance. Can you afford essentially a car payment amount each month on your own?
While Colorado has very low property taxes compared to other states, you must account for them in full each year. Property taxes vary by county and depend on the home’s market value. For example, Douglas County, Colorado has the highest property taxes in the state while Arapahoe County is on the lower end with an effective tax rate of .61% to Douglas Countys’ .66%. Colorado home values keep rising, sending property taxes on an upward trajectory. In an attempt to rein in taxes, voters passed Amendment B during the November 2020 election. This has led to a freeze of property tax assessment rates at the current rates (7.15% for residential property and 29% for non-residential property); a provision for future property tax assessment rate decreases.
Note that Colorado has a senior tax exemption for homeowners 65+ who have owned and lived in their home for at least 10 years prior to January 1st of the application year.
If you have a mortgage or HELOC you can deduct interest for loans used to buy, build or substantially improve your home or second home. But you can’t if the home loan was taken out to pay down credit card debt. You can only deduct interest paid on the first 750k of these loans if you financed it before January 1, 2017
Even if the maintenance, insurance and taxes are not problematic, will you be able to qualify for a refinancing of the loan? Do you have a high debt to income ratio? How high, or low, is your credit score? Moreover, how liquid are your assets? Can you access the money you need to pay your spouse for their equity in the home? While it is a good idea to preliminarily investigate different mortgage options, don’t apply for a mortgage until you are ready, since doing so can negatively affect your credit report.
Find a property inspector who is trusted and impartial to walk you through the home inspection process. They can find the problems you may not know about like wiring, plumbing, HVAC issues, and structural damage. A recent client wanted the family home so badly, they agreed to forgo the inspection saying that they knew the house and its' issues inside and out. When their divorce was signed, sealed, and delivered, she learned of a major foundation issue in the ballpark of $50 to $60,000. Unfortunately for her, it was too late to change the agreement.
We mentioned your child’s attachment to the home and while we recognize it may seem crucial in this heightened time, you alone will be shouldering the financial and practical responsibilities.
If you have a clear picture of the costs of your home’s upkeep, property taxes, homeowner’s insurance, and can pay your soon-to-be-ex equity, then staying in the marital home post divorce might be the best option. If these considerations are preventing you from taking on sole responsibility, consider a nesting arrangement where the children stay in the marital home full time and you and your ex-spouse maintain a smaller home or apartment nearby. Usually, life changes dictate that this is not a long term arrangement but it can work if you are amicable with your ex and your child(ren) are in high school.
We work with many couples and parents who contemplate staying in the family home post divorce and recognize the emotional, practical and financial considerations involved.
Want to know what your financial, post-divorce future will look like? Please give us a call at 303-468-5626 or schedule a 20 minute consultation so we can learn more about your particular situation.
