28 Mar Your Housing Options after Divorce Just improved

Major banks in Canada recently announced a reduction to their fixed rate mortgages. It seems bank executives are more confident about the housing market and the likelihood of a major correction in housing prices.

This should provide good news for people who are separating and making decisions of how they split their assets, in particular, the matrimonial home. For many, keeping the house is important for couples with children and keeping a stable environment for them. For older couples, whether they choose to buy a partner out and remain in the matrimonial home or sell and each purchase a new home, lower interest rates allow for more flexibility when it comes to possible settlement options.

Managing two households costs more than maintaining one household. With late in life divorce, retirement plans are greatly affected by housing costs.

Many people finance equalization payments owing to spouses through refinancing existing mortgages, so lower mortgage rates in those situation helps.

If selling the matrimonial home is part of a settlement plan, lower mortgage rates make home buying more attractive. If keeping the matrimonial home is an option, managing cash flow is easier with lower monthly mortgage payments.

The home you want to keep or the home you want to buy after divorce may
now be a real possibility.

11 Dec Dividing Property in Divorce

ID-10071842Deciding how to split assets is more than just dividing the values on paper.  People often make the mistake of believing that dividing everything in half is the simplest and fairest way of handling things.  This is not necessarily true.  People need to pay attention to the decisions they make about dividing property and consider the long term consequences.

Assets differ in a number of ways.  Some are liquid like cash.  Some assets like RRSP accounts are tax deferred.  Some assets need to be valued in a specific manner according to family law rules and regulations.  Investments may have a different value after taking into account possible capital gains taxes.

Sometimes assets have an emotional connection that may have more worth than the actual dollar value such as a house, business, or family heirloom.

Assets may have costs to consider.  A couple may have a $400,000 investment  account and a house worth $400,000 (mortgage free).  The assumption is that if one spouse takes the house and the other takes the cash, this results in an equal division.  Keeping the house has costs such as property taxes and upkeep and maintenance. The investment account will be growing over time earning interest. It may not seem quite the equal split over a period of time.

Debts are also part of the division of marital property.  Allocating debts in divorce may mean paying them off, refinancing, or applying for new debt.  Different types of debt carry different fees, charge, penalties and terms.   Just because you have $10,000 left on your car loan and $10,000 credit card debt doesn’t mean that the car loan should go to one spouse while the credit card debt goes to the other.

Divorce settlements are often agreed upon with limited insight into the long-term consequences.  As a result, settlements that seem to be fair and workable initially do not necessarily stand the test of time.  Therefore, it is highly recommended that a divorce financial planner be brought into the process so that you can see how decisions you make today will affect the rest of your life.

Image courtesy of renjith krishnan at FreeDigitalPhotos.net

14 Sep Joys of Home Ownership… Or not

 

Elise (not her real name) was happy when she ended up as the sole owner of the family home as a result of her divorce property settlement. But getting the family home in a settlement isn’t always the best thing.

Located in a nice neighborhood, the home was valued at more than half a million dollars. The property had increased 4 fold since she and her ex-husband purchased it some 18 years ago.

Elise needed a mortgage to secure the home, but the monthly payment was well within her budget (or so she thought). She wanted to keep the house to minimize the impact of the divorce on her two kids, avoiding changing schools and uprooting friendships. “There’s no way I’d ever be able to find another home as nice as this one,” she told me.

Less than one year after the divorce, things started falling apart. First, the furnace needed to be replaced — a $900 expense, which she charged to her VISA card. Then, a leaky roof  needed to be replaced — $1,600,  which also went on her credit card. That spring, the fence along one side of her property fell down after a big storm and upon examination, it was discovered that the main posts were rotting so guess what, a unplanned new fence went up  while she was on vacation with the kids. (the fence and the vacation went on her  line of credit ). She wondered what might come next.

Then, toward the end of summer, her washer failed. Because the warranty had expired a year earlier, it made  more sense to buy a new, more energy efficient washer for $1200 than paying the $500 repair bill.

Her debt was piling up. Before she knew it, her credit card and line of credit debt had grown from zero to more than $21,000, all since the divorce.  Small repairs and routine maintenance  expenses never seem to stop  (like hiring someone to do lawn  and snow removal that her husband had done before)

I routinely call Elise to see how she’s doing and she voiced her concerns about the house which was approaching a point where more costly repairs might also become necessary.  I told her she had to consider the possibility she might be best off  selling this house and move to a newer home requiring less maintenance. I recommended she get a home inspection by a licensed home inspector while she considered her options. She knew she couldn’t sell it and get what she wanted for it without first doing some of repairs.  I called two realtors to get independent market appraisals. I requested assessments both with and without the repairs. Both agents agreed the repairs were necessary and would generate a higher selling price that would more than cover her costs. Elise concentrated on the things that most potential buyers focus on (the roof, new paint job and new tiles in the bathroom). The realtor also took her around and showed here what newer homes were available in the neighbourhood. With information provided by the realtor re selling and buying options, I was able to provide Elise with a budget of future housing costs. I showed her how she could pay off all her debt, putting herself in a far more comfortable financial position going forward.

The repairs were completed quickly. The house sold a few weeks after listing it. She and her kids moved to a lovely new home in the same neighbourhood. Elise later told me that moving to a new home was actually a great relief as it represented the fresh start she needed to move beyond the divorce. Having the right numbers and information paid off for her.  A Divorce Financial Professional can help you get the right numbers and information before you sign your settlement agreement which may lead to an even greater pay off for you.

 

Image courtesy of FreeDigitalPhotos.net

21 Feb Divorce and the New Financial Reality

As  the  ups and downs of in the economy  increase,  so does the stress on married people to deal with the  inevitable pressure points that develop in the relationship.

Couples now have to deal with financial problems that are new to their relationship.

  • How to pay the bills if both of you are unemployed?
  • How to cope with the primary bread winner working less, or not at all
  • What if your spouse is spending more time at home?
  • How to accept a change in who is the primary earner in the marriage? (Wives making more than husbands is a fast growing trend because more men are being laid off than women).
  • How to live with the threat, or the reality, of being forced to move due to a mortgage foreclosure or rental eviction?
  • How to handle the added tension when grown children move back into the home due to their being laid off or not finding a job?

Dealing with these financial realities in an adversarial process doesn’t help anyone in the long run.   Working in a mediation or collaborative setting can help both spouses and families work through options and solutions that may ease these financial realities and help everyone transition to a secure future.

02 Sep Can’t Sell The House?

Traditionally, autumn is a boom season for divorce, particularly for couples, who wait out the summer before returning home to cut their marital ties. Last fall was different.

“In September and October of 2008, which would ordinarily be important months for divorce lawyers, the stock market went bananas, and we experienced an extraordinary hit,” says Robert Dobrish, a senior partner at Dobrish Zeiff Gross LLP in Manhattan.

In November, respondents to a survey of the American Academy of Matrimonial Lawyers reported, by a two-to-one margin, that they typically see a decline in the number of divorces during national economic downturns. Real estate is a huge factor.

Real estate normally represents a third or more of a couples assets. Home values had taken a hit over the past 18 months. What we’ve seen is homes taking much longer to sell or not sell at all.There has to be enough money for the other person to go out and buy another home.

“It’s been more than a year that people have been holding back, and that’s a long time to hold back in a bad relationship.” Says Dobrish

07 Jul Facing divorce. . .Should I sell the house now?

It was reported yesterday that home sales in the Greater Toronto Area have rebounded in a big way after a brutal slump, increasing nearly 30 per cent since last June and heralding the return of a seller’s market. What does that mean to you if you’re someone facing divorce today?  Should you consider selling quickly to take advantage of the market now?  Some people believe they should sell now and split the money and each buy something  on their own before prices climb even further.  

Many people are carrying large debt loads and are shocked to see how much they in fact have left over  after paying off all their debts.  In calculating the cost of a new home, you must take into account such things as legal fees, moving costs, utility set up fees.

The big expense  for buyers,however,  is land transfer tax.  And if you  considering buying in the GTA, there is an additional land transfer tax assessed.  Most realtors and mortgage brokers websites have a land transfer tax calculator. If you can’t  locate one easily, let me know and I’ll do the  calculation for you.