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When going through a divorce, an important financial decision that many couples have to face is whether one spouse may have to take over the mortgage of a shared home (referred to as mortgage assumption) or refinancing after a divorce. This decision will depend on the mortgage terms and each spouse’s individual financial situation. A […]

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As a certified educator in personal finance, he edits and writes content that focuses on retirement, investments, home buying and other financial topics.\r\n\r\nArturo is a bilingual native in English and Spanish, and also writes as a freelance journalist for NBC News, among other publications. 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A financial advisor can also help you create a financial plan that addresses your needs during and after a divorce.

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What Is a Mortgage Assumption?

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A mortgage assumption is when one spouse takes over the existing mortgage in their name, and assumes full responsibility for the loan’s payments and terms. The original loan terms remain intact, including the interest rate, which can be beneficial depending on current mortgage rates. However, not all mortgages are assumable, and the lender must approve it after performing a credit check and income verification.

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What Is Refinancing?

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Refinancing your mortgage is a common choice when the original loan is not assumable or when new loan terms are more favorable. When you refinance after a divorce, either you or your ex will apply for a new loan with new terms, which can include a different interest rate, loan length and payment structure. Refinancing may also come with closing costs and fees, and the spouse applying for the refinance must qualify for the new loan based on their individual financial profile.

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Mortgage Assumption vs. Refinancing Key Differences

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Understanding the key differences between mortgage assumption and refinancing is important during a divorce, as it can impact how you manage the property and finances after the separation. Here are five key differences:

","$3f","

Alternatives to Mortgage Assumption and Refinancing

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Here are three general alternatives to consider when going through a divorce:

","$40","

Mortgage Assumption vs. Refinancing: Which Is Best for You?

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Consider your financial capability. If you cannot qualify for a refinance on your own, assuming the mortgage may be your only option. Refinancing may be a better choice if you can lock in a lower interest rate.

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You should also think about the home’s equity. If there is significant equity in the property, a buyout may be necessary to compensate the spouse relinquishing ownership. Refinancing could also help access some of that equity, which may be useful during divorce negotiations.

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Emotional attachment is another factor. If one spouse wants to keep the home for personal reasons, either option can allow the other spouse to be removed from the mortgage without selling the property.

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Finally, consider your creditworthiness too, as refinancing requires strong credit. If your credit has been impacted, assuming the mortgage with the original terms may be easier, but make sure you can handle the payments on your own.

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Bottom Line

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Choosing between mortgage assumption and refinancing during a divorce requires careful evaluation of your financial situation, mortgage terms and long-term goals. Mortgage assumption lets you keep the existing loan, while refinancing allows you to start fresh. Alternatives like buyouts or selling the home may offer more flexibility if neither option is suitable.

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Financial Planning Tips

","$41","

Photo credit: ©iStock.com/AndreyPopov, ©iStock.com/Jacob Wackerhausen, ©iStock.com/Prostock-Studio

"],"experts":{"name":"Michele Lerner","topic":"Home Buying","bio":"An award-winning writer with more than two decades of experience in real estate.","imageUrl":"https://d31s10tn3clc14.cloudfront.net/imgs/michele-lerner.png","email":"mlerner@smartasset.com"},"link":"/mortgage/mortgage-assumption-vs-refinance-after-divorce","published":{"datetime":"2024-9-19","readable":"September 19, 2024"},"shareInfo":{"title":"Mortgage Assumption vs. Refinancing After a Divorce","origin":"/mortgage/mortgage-assumption-vs-refinance-after-divorce"},"isNewsArticle":true},{"id":"cG9zdDoxOTMxNjM=","databaseId":193163,"postId":193163,"author":{"node":{"id":"dXNlcjoxNTE=","databaseId":151,"userId":151,"avatar":{"url":"https://secure.gravatar.com/avatar/323c6a8b57ed5a7d369698ea973eac91?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":null,"additionalMeta":{"expertise":null,"__typename":"User_Additionalmeta"},"email":null,"firstName":"Andrew J.","fullName":"Andrew J. Dehan","lastName":"Dehan","name":"Andrew J. Dehan","postCount":{"pageInfo":{"offsetPagination":{"total":68,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"andrewjdehan","__typename":"User"},"__typename":"NodeWithAuthorToUserConnectionEdge"},"categories":{"nodes":[{"id":"dGVybToxOTUwMA==","children":{"nodes":[],"__typename":"CategoryToCategoryConnection"},"databaseId":19500,"categoryId":19500,"link":"https://smartasset.com/home-selling/articles","name":"Home Selling","postCount":{"pageInfo":{"offsetPagination":{"total":15,"__typename":"OffsetPaginationPageInfo"},"__typename":"CategoryToPostConnectionPageInfo"},"__typename":"CategoryToPostConnection"},"slug":"home-selling","ancestors":{"nodes":[{"name":"Mortgage","slug":"mortgage","__typename":"Category"}],"__typename":"CategoryToAncestorsCategoryConnection"},"parent":{"node":{"name":"Mortgage","id":"dGVybTo4Ng==","slug":"mortgage","__typename":"Category"},"__typename":"CategoryToParentCategoryConnectionEdge"},"__typename":"Category"}],"__typename":"PostToCategoryConnection"},"content":"$42","date":"2023-03-28T11:36:37","excerpt":"

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Selling your house is a major financial transaction. Whether you’re downsizing, upgrading or moving for another reason, you need to know what to expect. After all, you want to get the most you can out of your investment, and part of that is knowing what costs you’ll need to pay to sell your house. If you’re wondering “how much does it cost to sell a house?” we’ve got the answers for you. A financial advisor can help you make major financial decisions, like buying or selling a home.

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How Much Does It Cost to Sell a House?

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On average, it costs around 10% of the sale price to sell your house. This can vary depending on factors like location, real estate agent commission and any money you’ve spent on repairing the home before selling it. There are actions you can take to lower this percentage but know that a lot of these expenses aren’t negotiable.

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What Costs Should You Expect?

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There are several costs you’ll incur when selling your house. Some of these can vary depending on your situation. For instance, you may not need to make many repairs or upgrades, or maybe you’re in a state that charges fewer taxes. Regardless, you’ll need to work some, if not all, of these costs into the plan for your home sale.

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Repair and Upgrade Costs

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If you’re selling an older home, there’s a good chance it will need some upgrades or repairs. For instance, the refrigerator or range may be due for replacement. It’s important to know what upgrades will pay off. If you suspect there are any issues with the home, you may want to pay for an inspection before listing. This usually costs $300 to $500, according to Realtor.com.

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If you uncover some issues, you’ll need to fix them or disclose them when accepting an offer on the house. While upgrades and repairs can be costly (expect on average a cost of $3,000 to $5,000, unless a major repair is needed), they can get you a higher sale price and make your home easier to sell.

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Taxes

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No one likes to pay taxes, but unfortunately, some are unavoidable. There are three types of taxes you should consider when selling your house:

","$4f","

Mortgage Payoff

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If you have a mortgage on the house, a good portion of your sale may go to pay off the mortgage. While this may seem cut and dry, one important thing to consider is if your mortgage has a hard prepayment penalty. This is when a lender charges you for paying off the mortgage early, even in the case of a home sale. While most lenders do not charge these, it’s common enough that it’s worth asking about.

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Real Estate Agent Commissions

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When it comes to selling a home, real estate agent commissions comprise a significant portion of those costs. Typically, sellers pay the commissions of both the buyer’s agent and the seller’s agent. Expect this to be 5% to 6% of the sale price.

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If you’re selling your home yourself – without a real estate agent – you won’t have to pay for a seller’s agent, but the buyer may want you to pay for their own agent. In a competitive seller’s market, you may be able to get the buyer to pay the commission as part of negotiations. However, this can turn off prospective buyers and you may not find someone to agree to it. Just keep in mind that you may need to pay this commission if it’s a buyer’s market.

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Additional Closing Costs

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Closing costs are additional costs you’ll pay when you close on your house. On top of taxes and commissions, they include title insurance, attorney fees, escrow fees and any concessions or closing credits you’ve agreed to pay the buyer. If you want to estimate your closing costs, use our handy closing costs calculator.

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Moving Costs

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Before you hand the keys over, you’re going to need to get your stuff out of the home. Even if you’re able to enlist family and friends to help you move, you may still need to rent a trailer, pay for gas and pay for packing supplies. At a minimum, you’ll probably spend a couple hundred dollars.

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If you’re paying for professional movers, expect the costs to break into the thousands. Remember that distance has a lot to do with costs, too. If you’re moving locally, the average costs range from $917 to $2,532, according to Home Advisor.

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How Are a Seller’s Costs Paid?

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Most of the seller’s costs are paid at the closing table. Things like taxes, commission and other fees will come directly out of the sale. This is convenient, as you won’t have to come up with cash from another source.

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On the other hand, the seller’s costs to prepare the property for sale will come out of pocket. That means you’ll need to pay for repairs, upgrades and the costs to clean and stage the home. If you have a buyer, you may be able to negotiate a lower home price instead of paying for repairs if you don’t want to pay in cash.

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A Breakdown of Costs

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Let’s work through an example to answer “how much does it cost to sell a house?” The median home sale price for the past couple of years has been hovering around $400,000, so we’ll use that amount for this example. The costs listed here are based on national averages, with some being flat fees and others being percentages of the sale price. Keep in mind that these are estimates and that your costs may vary.

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Sale price: $400,000
Mortgage payoff: $200,000
Real estate commissions: $24,000 (6%)
Attorney fees: $500
Escrow fees: $2,000 (0.5%)
Home improvements before selling: $5,000
Moving costs: $1,200
Additional closing costs: $4,000 (1%)
Costs incurred when between homes: $4,000 (1%)

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With those costs subtracted, you’re left with $159,300. Not including the mortgage payoff, the costs account for just over 10% of the sale price.

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Bottom Line

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Selling your home can come with some unavoidable costs. In general, it’s good to expect to pay 10% of the sale price in costs to sell. Remember that you’ll also need to pay off your mortgage if you still have one. While these costs may seem high, most of them are necessary and some, like renovations and agent commissions, can help you get the most out of your home sale.

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Tips for Selling and Investing

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Photo credit: ©iStock.com/Feverpitched, ©iStock.com/Dean Mitchell, ©iStock.com/Perawit Boonchu

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Buying a home is a major investment. You want to put your money into a house that’s going to meet the needs of you and your family. However, if that house isn’t available, you may consider building a home. Is it cheaper to build or buy a house? What are the pros and cons of building versus buying a house? We’ll answer these questions and more below. If you’re looking for your personal questions to be answered for your own situation, you may need to speak with a financial advisor.

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Is It Cheaper to Build or Buy a House?

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According to data from HomeAdvisor, it costs $109,466 – $459,981 to build a house in 2023, with an average of $284,723.50. The average national home price has hovered between $390,000 and $405,000 in the past year, for those who are buying.

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So, that makes it cheaper on average to build a house, right? Not exactly. There’s one key cost that’s not factored into this cost of building a house: land. If you already own the land you’re building on, that’s not something to worry about. However, if you need to buy the land, you could be paying anywhere from a few thousand per acre to tens of thousands for the lot.

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On top of buying the land, you also need to pay to have it developed for your home. Excavation can cost a few thousand dollars on average but can go up in price if the land is hard to clear. For example, it could get costly if the land is full of hard bedrock or heavily wooded. You’ll also need to make sure the land is zoned for residential use, that it’s accessible from a road and that utilities run out of it.

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With all of the costs to buy and develop land, buying an already built house on its own parcel is often cheaper than building a house from scratch. The right decision, though, often depends on what you want and what you can afford.

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Pros and Cons of Building a Home

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Even if building a home is more costly than buying a home, there are still many reasons you may want to do it. There are a lot of factors you need to consider before deciding to build. Let’s get into some of the major reasons for and against building a home.

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Pro: You Can Build the Home You Want

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One of the big reasons people build instead of buying a home is that it allows them to build a version of their dream house. When you build, you have more flexibility to get what you want, versus having to decide between what’s on the market.

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Con: Financing Your Home Build

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Getting a mortgage for a home builder is not as simple as getting one for an existing home. For one, you’ll have to buy the land. You can get a land loan, but the most common way is to buy in cash. Next, you’ll have to finance the construction. You can do this with a standalone construction loan or use a construction-to-mortgage conversion loan. Just know that when financing a build, there are more hoops to jump through. The better your credit history and income, the easier it will be.

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Be prepared to wait, often for more than a year.

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Pro/Con: Finding Land and Hiring a Team

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Part of building a home is choosing all of the details. And the details are legion. Some folks relish the opportunity to put their stamp on a residence; others find the process exhausting. If you find a location you love and connect with a quality architect and contractors, the experience can be great. However, if you compromise on the location and have a subpar time with the architect and contractors, things can turn sour. Make sure that, with whomever you hire, you get references and properly vet them.

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Pros and Cons of Buying a Home

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After reading about the complexities of building a home, you may realize that buying a home is better for you. Here are a few reasons for and against buying an already-built home.

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Pro: The Process Is Straightforward

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Many more people buy homes than build homes. That means more real estate agents and mortgage lenders specialize in buying over the building. The process is streamlined. You get an agent, apply for a mortgage, have an offer accepted, close on the house and move in. With building, it’s more complex and the process takes much longer.

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Con: You’re Subject to What’s Available on the Market

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If the home you want to move into isn’t for sale, you either have to wait or compromise. For most people buying a home, they have a timeline and they have non-negotiables. If you’re touring house after house and aren’t finding one that’s right, you may reconsider building a home.

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Pro/Con: Already Built Homes Are Closer to Urban Centers

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Most land available for sale is in rural areas. If this is part of your dream, building may be an appealing option. However, if you want to live close to amenities, you’re likely going to need to buy an existing home. Established homes typically have surrounding communities, meaning nearby entertainment, grocery stores, jobs and schools.

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The Bottom Line

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Is it cheaper to build or buy a house? Generally, it’s cheaper to buy a comparably sized existing house. There are many positives to building a house, but it’s usually the more expensive route. You’ll need to buy land and pay for development and construction. Homes that are built already are properly zoned, have access to roads and utilities and often come with surrounding communities.

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Home Building and Buying Tips

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Photo credit: ©iStock.com/vitranc, ©iStock.com/courtneyk, ©iStock.com/jhorrocks

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Buying a home for the first time is an exciting milestone, but it can also be financially challenging. Fortunately, several grant programs are available to assist first-time homebuyers in making their dreams of homeownership a reality. These grants are typically offered by government agencies, nonprofit organizations and some private entities. Unlike loans, grant money for […]

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Consider working with a financial advisor as you prepare to buy a new home. An advisor can help you plan for the purchase and integrate it into a comprehensive financial plan.

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What Is a First-Time Homebuyer Grant?

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A first-time homebuyer grant is a form of financial assistance that helps new homeowners cover the costs associated with purchasing a home. Unlike loans, which must be repaid over time with interest, grants are essentially “gifts” of money that recipients can use to reduce their upfront home buying expenses. These grants are typically awarded to low- to moderate-income individuals or families who may have difficulty securing traditional financing or saving enough for a down payment.

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First-time homebuyer grants are usually offered by state and local governments, federal programs and certain non-profit organizations. The funds provided by these grants can be applied toward the down payment, closing costs or other expenses related to home buying, making it easier for first-time buyers to afford a home.

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First-Time Homebuyer Grants to Consider

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There are a variety of grant options available to first-time homebuyers, each designed to meet different needs and circumstances.

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Federal Housing Administration (FHA) Down Payment Assistance Grants

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The FHA provides grants that can help cover down payments for qualified first-time homebuyers. These grants are often available through local housing authorities and state housing finance agencies. While the FHA itself does not directly offer grants, it partners with other organizations to make these resources available to eligible buyers. Typically, applicants must meet certain income criteria and take a homebuyer education course to qualify.

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Good Neighbor Next Door Program

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This program, offered by the U.S. Department of Housing and Urban Development (HUD), is a first-time homebuyer program that provides substantial discounts – up to 50% – on homes for teachers, law enforcement officers, firefighters and emergency medical technicians. Eligible buyers must commit to living in the property for at least three years. The program is aimed at revitalizing specific areas and encouraging community stability by making homeownership more accessible for public servants.

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State and Local Homebuyer Grants

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Many states, counties and municipalities offer their own first-time homebuyer grants. These grants vary widely in terms of eligibility requirements, grant amounts and program details. For example, some state programs may provide matching funds to help with down payments, while others offer a set amount to cover closing costs. It’s worth researching local programs, as they may provide more tailored assistance based on the cost of living in the area.

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Nonprofit Organization Grants

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Nonprofit organizations, such as Habitat for Humanity and the National Homebuyers Fund, offer assistance for first-time homebuyers. These organizations often work with low-income families or individuals to help them find affordable homeownership options. In addition to grants, nonprofits may provide resources like financial counseling and homebuyer education to support long-term homeownership success.

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How to Qualify for a First-Time Homebuyer Grant

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Qualifying for a first-time homebuyer grant depends on meeting specific eligibility criteria that vary by program. Generally, applicants must fall within certain income limits, which are often set as a percentage of the area median income (AMI). For example, some programs may require applicants to earn less than 80% of the AMI for their region.

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Most grants also require that applicants be first-time buyers. This is typically defined as someone who hasn’t owned a home in the past three years.

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The application process for a first-time homebuyer grant often involves providing documentation such as proof of income, tax returns and a credit report. Many programs also require participants to complete a homebuyer education course, which covers topics like budgeting, mortgage options and home maintenance. This course is designed to help first-time buyers understand the financial responsibilities of homeownership and improve their chances of long-term success.

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Once eligibility is established, applicants can submit an application through the program’s website or by contacting the organization directly. Grant approvals are often contingent upon such factors as funding availability and the applicant’s creditworthiness.

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Other Assistance for First-Time Homebuyers

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In addition to grants, there are other resources and programs that provide financial assistance to first-time homebuyers.

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These options can make it easier for buyers to secure affordable financing and reduce the overall cost of purchasing a home.

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Bottom Line

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First-time homebuyer grants offer financial assistance to those looking to achieve homeownership. With a range of grants available from federal, state, local and nonprofit organizations, first-time buyers have access to resources that can help cover down payments, closing costs and other home-buying expenses. The different types of grants available, eligibility criteria and classes, and other assistance programs all help make homeownership more accessible and affordable for new buyers.

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Frequently Asked Questions

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Can I Combine Multiple Grants and Assistance Programs?

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Yes, it’s often possible to combine multiple grants and assistance programs. For example, you may be able to use a down payment assistance grant alongside a first-time homebuyer grant, provided you meet the eligibility criteria for each program. With flexible programs and requirements, the dream of homeownership can suddenly become a reality for first-time homebuyers.

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Do I Have to Repay a First-Time Homebuyer Grant?

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Most first-time homebuyer grants do not need to be repaid as long as you meet the terms of the grant. However, some programs may require repayment if you sell the home or move out before a specified period, such as three or five years.

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How Can I Find First-Time Homebuyer Grants in My Area?

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The best way to find local grant money for first-time homebuyers is to check with your state’s housing finance agency, local government housing department or reputable nonprofits that offer housing assistance. Many websites, including HUD’s website, provide resources for first-time homebuyers to find programs in their area.

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Homebuying Tips

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