In areas of high-cost housing such as the San Francisco Bay Area, it is common for families to simply assume they will sell their home and live off the proceeds. However, without specific planning, critical components and potential consequences may remain unexamined: net cash received from the sale, cost basis, taxes, net proceeds, timing for the move, where to live to satisfy concerns for community, family, and friends, and even the logistics of the move. Without planning, unanticipated problems arise and the results often end up less than satisfying.
To answer this question, let’s start by getting a historical perspective. Between 1900 and 1971 the lowest interest rates 30-year fixed home loans was in the mid 1940s when the interest rates on home loans bottomed out at around 4.6% (NBER). Between the 1940s and 1971 interest rates steadily climbed reaching an average of 7.7% in 1971. Rates peaked in 1982 at 18.5% and, for the most part, they have been declining ever since. This trend is easily visualized on the chart below.
If you’ve tried to buy or refinance a property any time during the past few years, invariably you’ve heard of, or experienced, the issues there are with appraisals. An all-too-common theme has been: buyer gets pre-approved with their lender, finds their dream home, negotiates a purchase price with the seller, and… it all falls in a heap when the appraisal does not support the price the buyer is willing to pay.
Divorce at any age is life changing. The key to success, to ensure you are financially in the best shape possible, is to get professional financial planning advice that is specific to divorce.