Ask the Money Lady,
My husband and I just signed our legal separation papers, but I still live in our matrimonial home that is now up for sale. I have two questions: I want to move out, so should I buy another home by myself? Even though I haven’t actually received it yet, does child support count as income? I do work full-time but think I need the extra income to qualify. What do you think?
Jill XXXX (desperately seeking a new life!)
Dear Desperately Seeking a New Life!
Good for you for getting your separation agreement signed and finalized. Having gone through this myself, I know this can be an enormous emotional undertaking for all involved. To answer your questions…first about the money: When you separate and apply for credit on your own, please ensure all credit cards and loans that were once joint have now been terminated or at least released from your spouse as a co-applicant. If you are walking away with a cash payout before the matrimonial home is sold, make sure your legal separation agreement indemnifies you of any joint loans or mortgages on the property. Of course, it goes without saying that if you are moving out and your husband is staying in the home that all mortgages/loans secured by the property revert to his name including legal title.
Now that you are free, do you have money for a down payment? Alimony can be taken as income but most banks to mitigate risk will only use 80% and only 50% of child support. If you have employment income to add to this, you will be highly favored by the Banks who will want to wrap themselves around you as a brand new single professional client.
To rent or buy…..that is the question! When I legally separated from my husband, I bought a condo and figured I would move there with my daughter. Well, at the time of close, my daughter changed her mind and went to school in the UK and my husband and I were at least trying to reconcile. Needless to say, I ended up selling the condo 6 months later and took a $43K loss from real estate fees, lawyers and land tax. I wasn’t ready. Are you?
If you are, then go for it, embrace your new found freedom and start living your new life!! But if you were like me, maybe renting for a year, ironing out all the kinks, and then buying what you want as a more confident purchaser might be better. This would at least give you time to get pre-approved for a new home purchase and to know exactly how much you can afford as a Powerful New Single!!
Becoming divorced or widowed sets you back not only financially, but emotionally. I am the first one to agree that you must pick yourself up, rise above your fear and face the world to conquer new things. But, sometimes you need to take some time to nurture you! Mixing money and emotions always creates situations that you usually regret later. After everything you have been through its “YOU-TIME” so look after yourself! Take your time. Don’t be in a hurry. Talk to your financial advisor and push forward when you’re ready……you’ll be stronger for it!
Good Luck and Best Wishes,
Written by Christine Ibbotson, Author of “How to Retire Debt Free and Wealthy” Follow on Facebook & Instagram