One of the biggest mistakes people can make in a divorce is insisting that they keep the marital home because the mortgage payment is “less than what they can rent for.” The cost of homeownership is much more than the mortgage payment and there are many pros and cons for either renting or owning a home, which each individual needs to assess for themselves. Homeownership or renting is not always about dollars only. The intangibles matter and they carry a price as well.
| Pros of Home Ownership | Pros of Renting |
| Stability with no landlord: You are in charge and can do what you want when you want (e.g., remodel, move, rent out, stay forever, etc.) | Cheaper monthly payments usually because of no taxes or maintenance, as well as expenses that are covered by the landlord, including utilities |
| Payments build equity so there is a built-in savings component, and it improves your credit | Security deposit much cheaper than a down payment and closing costs |
| Tax advantages | Flexibility: Easier to move or downsize when necessary |
| Pride of ownership and belonging to a community, which can be good for both parents and children | Lack of responsibility and maintenance: who cares it isn’t yours |
| Ability to borrow against your home | The ability to put money into other investments that may yield higher returns |
| No more monthly payments once mortgage paid off | No risk of home price depreciation |
| Currently, mortgage interest rates are at a historical low | Less pressure to upgrade: renters typically have a higher tolerance to things being outdated because it is temporary space |
| Cons of Home Ownership | Cons of Renting |
| Larger down payment is required, obtaining a mortgage can be challenging, and closing costs can be steep | No wealth creation from property value increasing or paying down the mortgage balance |
| Long-term commitment: harder to pick up and go if you want to move for whatever reason | Payments never stop when renting and tend to increase over time |
| House values can rise and fall over time | No tax benefits |
| Greater responsibility and potential liability: you must pay taxes and homeowner insurance, which typically rise over time | More temporary, less stability: owner can decide to sell or re-purpose the property any time |
| Need for an emergency fund: there are lots of hidden costs you don’t realize until you own a home | Less control: must deal with a landlord or management company and always be at their mercy |
| Your home can be damaged or destroyed (and not fully insured) | Rules, regulations, and limitations determined by property owner/manager (like no pets) |
When looking at whether to rent or buy you are the only one that can assign the true value of things. Will you experience peace of mind that you have control of your space rather than being at the whim of the owner of the property or do you prefer the value of keeping the kids in the marital home if possible? It is critical that you analyze the dollars and cents along with these less tangible, but still very real, desires so that you do not risk losing your home altogether or have it falling down around you.
A Certified Divorce Financial Analyst is a great resource to support you in weighing these pros and cons and a Certified Divorce Lending Specialist can help determine your eligibility to keep the house based on the specifics of your divorce negotiations. Consulting these resources early in your negotiations will greatly increase your chances of putting together a settlement that is realistic and set you up for success going forward into the next chapter in life.
