Report shows why divorce rates are not as high as before
Who would ever think that the housing bubble could cause quite an effect among couples planning on a divorce? A report by Bankrate.com states, “If the home’s value has fallen below the amount owed on the mortgage, neither spouse wants to be saddled with that liability. If one wants to keep the home, it’s difficult to refinance the mortgage so the departing spouse can be cut loose from the debt. And evaporating home equity can take with it the means to pay lawyers for the divorce itself.”
So what’s the final decision?
Postpone the divorce.
That’s a wake up call for most couples who have plans of parting ways and deciding who would be left with the property – a much undervalued one. Unless you’re a golf icon who’s not worried on what to do with his mansion after a very public scandal and divorce, the financial repercussions of managing the mortgage or simply, living with a wiped out equity, is absolutely draining.
We’ve noticed a good recommendation at the report’s conclusion though. “Most important, they say, is to pay sharp attention to the valuation of the home when dividing assets. Both spouses need to be honest about how low that home’s resale value may be now, given the current weak market. If it is valued too high, it distorts the distribution of assets and liabilities from the marriage. Divorcing spouses may have to sell some of their investments to generate cash to pay off the mortgage on their former homes, and allow each to move on separately.”
This goes to show that couples who are on the brink of their marriages have to sit, plan and arrive at a decision whether to sell the home and divide the proceeds, buy out the home from one’s spouse, sell half of the home to the spouse or keep a joint ownership. Any of these options should be of both parties’ interest. And before they forget, there are tax implications that have to be considered too.
A good advice that we can give is for every couple to consider the long term consequences of their plans. If you decide to sell now and clearly, the markets not on your side, you’re absolutely giving up any financial security that you may have in the future. If the situation isn’t that critical yet, your lawyer may have a sound advice on your condition.