You and your spouse own your home jointly, but you would like to keep it after the divorce. Your spouse says that they will give up their ownership claim in the house if you will trade them other assets in exchange. For instance, maybe they are interested in a savings account, an investment account or a retirement account.
But should you actually make that exchange? It can be useful, but there are a few things you need to consider.
Is the house an asset or liability?
First and foremost, if you still have a mortgage on your home, then it is a bit of a liability rather than a pure asset. The house may be worth $350,000, but you are still paying that mortgage every month. You also have to consider other costs like utilities, taxes, or maintenance and upkeep. Finally, you generally have to refinance your mortgage after a divorce because you are going down to one income, which can also be difficult to do depending on your financial situation.
On top of that, you have to think about how these assets will change in the future. Say that there is a decrease in property values, so your home drops to $250,000 over the next 10 years. Meanwhile, your ex invests the money from your savings account and the value of that account doubles. These assets may have had similar values when you exchanged them, but your ex’s asset is going up in value over time while yours is going down.
Of course, that is just a hypothetical example, and the house could also increase in value. But it just shows why you have to think of the big picture and the financial ramifications when working your way through the legal process of a divorce.