Divorce is an emotional upheaval, and for many couples one of the most challenging decisions involves the family home. The complexities are even greater in the current fluctuating property market. So, is it worth trying to hold onto the house, or is it more prudent to sell?
Auckland divorce lawyer Jeremy Sutton said the family home was often the dominant asset in a divorce and when only one home was involved, many couples resigned themselves to the fact that they will have to sell. High interest rates and high rental costs in the current market however were complicating that decision and leading separating couples to come up with more creative measures.
“In the current market I think a six-month cooling off period to really think about what you’re going to do is important,” said Sutton.
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“One you’ve decided to split, it’s about giving some breathing room and time to think not only about the next six months but the next six years.”
Property law expert Joanna Pidgeon said couples who bought at the peak of the market and were faced with selling as a result of separation were struggling.
“If they bought at the peak of the market and now they’re trying to sell, the value of the property has fallen. Some are questioning if they will even be able to repay the initial mortgage they got as a couple,” said Pidgeon.
Homeowners facing a separation in the current property market may be better off finding a way to hold onto their home until the market improved, said Sutton. But it depended on the situation of the separation and how amicable it was.
“If it’s a really toxic separation then there’s no way they could stay living in the same home together until the market improves.”
Family lawyer Jeremy Sutton: "A six-month cooling off period to really think about what you’re going to do is important." Photo / Supplied
They both said when children were part of the equation, the situation was even more challenging.
Keeping the family home may provide a sense of stability for children during a tumultuous time and creative solutions were being developed by some couples if they could reach an agreement, said Sutton
One partner might remain in the family home to maintain consistency for the children, or separated couples had arrangements like “bird nesting”, where parents alternate weeks in the family home.
“It’s quite normal for one party to stay in the house for a period to enable kids to see out schooling, or for parents to rent a one-bedroom property and take week about staying in the family home with the children. It really depends on the situation and environment of the separation,” said Sutton.
Increasing rents and the challenge of paying a mortgage on one income were making that much harder, however. People were moving back home with their parents or adding an ancillary dwelling onto family members properties so they could live there while separating and trying to rebuild financially to buy another home on their own, said Sutton.
A split can lead to one or both parties in the relationship needing to rent. Photo / Fiona Goodall
With children involved, school zoning also came into the equation, said Pidgeon.
“If you’re selling the family home and it’s in one school zone, can you afford to rent or buy a new property in the same zone, will the children be able to keep going to the same school? There’s a lot to consider,” she said.
“The initial reaction can be, I really want to save the family home and keep things consistent for the children. Yes. But if that decision creates a lot of financial pressure, then we need to consider whether that is the right decision.”
Pidgeon said the age and stage of life could also have a big impact with older people finding it more difficult to secure a new mortgage.
“Once you get to a certain age, you can no longer secure the 30-year mortgage term. What does that do to what you can borrow or what you can buy?” she said.
“It would be rare that there’ll be enough money for one partner to retain the family home and the other person be able to fund the acquisition of another.”
Accessing KiwiSaver funds had become a critical lifeline in navigating these financial challenges.
Lawyer Joanna Pidgeon: “Once you get to a certain age, you can no longer secure the 30-year mortgage term." Photo / Supplied
“Some people are getting some or all of their KiwiSaver out to pay the other party,” Sutton added.
Pidgeon said she had also seen individuals access their KiwiSaver so they can buy a new home.
Harcourts salesperson Andrew Harley marketed a property last year for a couple separating. He said it was a tough market for anyone who had bought at the peak and was having to sell, but if they could, they were also buying in the same market which was more subdued.
He is about to list a property which had been bought at the peak and extensively renovated before the couple decided to separate.
“Unfortunately, the market is not sympathetic to what you paid for a property, it comes down to what it’s worth now and that’s a hard one if you’re forced to sell,” Harley said.
“Divorces are expensive at the best of times but if you’re talking about the house as well and having bought it at the top of the market and then having to sell, that is tough.
“It’s a stressful time for everyone irrespective of whether you might lose money or not. There are so many different situations, so you just have to understand the situation they’re in and try to look after everyone in the process.”
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