Divorce is one of life’s most emotionally and financially challenging transitions. For many couples, the family home is not only their largest asset, but also a place filled with memories, routines, and a sense of stability, especially when children are involved. Deciding what to do with the home can feel overwhelming at a time when emotions are already running high.

Studies show that the marital home is sold in roughly 60–70% of divorces, while in other cases one spouse retains the property or, less commonly, both remain owners for a period of time. There is no one-size-fits-all solution. However, there is a thoughtful, informed way to approach the decision so you can protect your financial future and move forward with confidence.

Where Should I Start in Deciding How to Handle the Home?

The first step is accepting that you need to prepare for any possible outcome. Divorce may begin amicably, but it can become complicated quickly. This isn’t meant to be pessimistic; it’s realistic. I’ve seen many situations where early assumptions no longer hold as emotions, finances, and legal considerations evolve.

As a Certified Financial Planner® and Certified Divorce Financial Analyst®, I can say with confidence that having the right team matters. Working with a financial advisor is just as important as working with a skilled divorce attorney—and, quite honestly, a good therapist as well. Each professional plays a role in helping you stay grounded, informed, and protected.

Before making decisions about the home (or any major asset), focus on assembling a strong support system that can advocate for you and help you understand both the short- and long-term implications of your choices.

What Are the Options for Handling the Home in a Divorce?

When it comes to the marital home, there are generally three possible outcomes:

1. One spouse keeps the home, and the value is offset with other marital assets as part of the settlement.
2. The home is sold, and the proceeds are divided according to the divorce agreement.
3. Joint ownership continues after the divorce, a scenario that is usually best avoided due to its complexity and risk.

As you consider these options, it’s critical to evaluate the financial realities behind them. If you’re thinking about keeping the home, ask yourself: Can I truly afford it on my own? Mortgage payments are only part of the picture. Property taxes, insurance, maintenance, repairs, and future improvements all add up.

A financial planner can help you build a realistic post-divorce budget so you’re making a decision based on clarity, not emotion or pressure.

How Do I Decide What’s Best for My Situation?

The decision often begins with a simple question: Can either spouse afford the home independently? If so, can that spouse buy out the other’s share of the equity?

In some cases, the home may be exchanged for other assets. For example, one spouse keeps the house while the other receives more cash or investment assets, or retains retirement accounts. These solutions can work, but it’s essential to understand the tax characteristics of each asset. Not all dollars are equal: pre-tax and after-tax assets have very different long-term values.

When the home represents a large portion of marital wealth and there aren’t enough other assets to balance the equation, neither spouse may be able to buy the other out. In those cases, selling the home may be the only viable option.

What Are the Tax Implications of Selling the Home?

Taxes are an often-overlooked part of this decision.

If the home is your primary residence, you may qualify for a capital gains exclusion when selling. Married couples can exclude up to $500,000 of capital gains, while single filers can exclude up to $250,000, provided the home meets residency requirements (generally living in the home for at least two of the last five years).

For example, if a couple purchased a home for $300,000 and later sold it for $750,000, the $450,000 gain would be fully excluded from taxes if sold while married and eligible under the rules.

This becomes especially important when one spouse keeps the home post-divorce. Selling later as a single filer may reduce the available exclusion and increase future tax exposure.

It’s also important to note that transferring ownership of a home as part of a divorce settlement is typically not a taxable event. Taxes generally apply only when the home is eventually sold.

How Should Mortgage Rates Factor Into the Decision?

Mortgage rates are playing an outsized role in divorce decisions right now, and for good reason.

Many homes purchased between 2013 and 2021 carry interest rates between 3% and 4.5%, while current rates are closer to 6% or higher. That difference can dramatically affect affordability.

On a $500,000 mortgage, the monthly principal and interest payment at 3% is roughly $2,108. At 6%, that payment jumps to about $2,998—nearly $900 more per month. Over time, the difference in total interest paid can be substantial.

Because of this, I’ve seen many divorces become especially contentious around the home. A low mortgage rate makes the property highly desirable, but that doesn’t automatically mean it’s the right decision financially.

Other Important Considerations

There are several additional factors to keep in mind:

• Mortgage qualification: If one spouse keeps the home, can they qualify for the mortgage on their own? Will refinancing be required?
• Liability exposure: If you give up ownership, make sure your name is removed from the mortgage and insurance policy.
• Children and custody arrangements: For some families, keeping children in the same home provides stability, but only if it’s financially sustainable.
• Joint ownership after divorce: While sometimes suggested as a temporary solution, this arrangement often creates more problems than it solves. Missed payments, disagreements over maintenance, or disputes about when to sell can quickly escalate and damage credit or relationships.

In most cases, I strongly recommend avoiding joint ownership post-divorce whenever possible.

Moving Forward With Confidence

Deciding what to do with your home during a divorce is never easy, but you don’t have to navigate it alone. With the right guidance, you can make informed choices that protect your financial well-being and support the next chapter of your life.

If you’re facing this decision, I encourage you to reach out. As a Certified Financial Planner® and Certified Divorce Financial Analyst®, I help clients evaluate their options, understand the financial trade-offs, and build a clear path forward.

Most importantly, remember this: you will get through this. With clarity, support, and a solid plan, it is possible to move forward with confidence and peace of mind.

Want to learn more? Schedule a complimentary call with Christine

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