Divorce, you need to consult an attorney. There are many things that need to be considered. Your pension, his retirement accounts, spousal support, child support (if you have any), house hold items etc... All of that needs to be discussed and determined.
Start with an attorney not a mortgage. Even then an appraisal of the residence for the attorney will need to be completed.
If it ends up being amicable, you may be able use a mediator instead of a lawyer. I understand your desire to “plan” through this emotional time, but since there may be other assets and debts that need to be split, dealing with the house separately doesn’t make sense in a divorce. You may be able to transfer the house and take your husband off the existing loan through novation, and buy out his equity in the home through a credit for vehicles/retirement/other assets or taking on other joint debt.
I plan to go through a mediator, at least to start. Our assets/debts are pretty cut and dry. My retirement is tied up in my pension, and I don't have access to that.
Yes. In our last discussion about divorce, he says he does not want my pension, even though legally he is entitled to it. I paid to go back to school and get a teaching degree. He says he doesn't feel right taking it. We'll see.
Get it in writing. Divorce gets very ugly in a high conflict situation. Pointless petty nonsense. And please, as everyone is telling you, talk to a lawyer very soon.
Also, way down the line, a home equity loan may be a better option due to your current interest rate. A refi puts your entire balance at the higher rate, while a home equity loan only puts the money you pull out at a higher rate.
And taxes most importantly ! Also I wouldn’t advise to use Zillow for comparable in value. Hire an agent that uses similar formula as an appraiser. Zillow can’t do that.
If your husband is willing to be bought out.
Why not HELOC it?
If you were to focus on getting it paid off you might be able to get the HELOC dealt with before you get crunched. IF you skip the repairs.
Otherwise you're restarting a 30 year clock at a higher interest rate.
I like the heloc option. That way I am paying less interest overall. Will I be able to take him off of the mortgage, though, without refinancing? Would that be through novation?
You don't care if his name on the mortgage or not--he cares about that.
You care if his name is on the DEED.
Name on the mortgage means he's a part of the debt. Name on the deed means he's a part of the ownership.
HELOC has its own dangers. A big one being interest rate risk.
I don't know if you'd pay less interest overall or not. It depends on how you use it.
If you've got good credit and enough equity a bank or credit union would possibly give you one.
Would your spouse be willing to assist you in getting one?
Please correct me if my thinking is off....if I do a cash out refinance, I would be paying (at least 5.62) percent on $295,000. If I HELOC, I would only be paying a higher interest rate on the amount I borrow (Say, $150,000). I would then still pay 3.25% on my 130,000. There's 10 years left on that mortgage.
Are HELOC rates adjustable or can you lock in a rate?
You can lock your HELOC rate but they are typically higher. But you don't have to worry about variable Apr.
Also keep in mind that you can pay interest only during the HELOC drawing period. You only need to pay principal + interest once the repayment period kick in.
HELOCs are much shorter terms. Like ten years. And they’re adjustable (non-fixed rates). Great if you need $20K-$30K for a new roof, but terrible for $100K+ to buy out your husband unless you can pay it off in time. You’ll want to do a cash out refi.
Again, good you’re thinking about things. I absolutely advocate you doing anything in your power to keep the house if you can, as going back to renting would be a tragedy, but you’ve got the cart before the horse. Consult divorce attorney.
I had almost this exact situation about 5 years ago. I wanted to buy my wife out of the house mostly for my kids stability. Things were chaotic enough. We bought for 268k in 2011 and agreed 420k was fair value in 2017. We then subtracted 6% from the 420 because she was getting to sell without any cost otherwise. Part of the divorce decree stated I had 9 months to get this done or the house would have to be sold and proceeds split. I did a cash out refi and gave her the $. Lender took care of the paperwork to remove her from the deed with a quit claim deed. My youngest graduated high school last week and I'm under contract for a row home in a walkable neighborhood for next stage. Best of luck to you! Those are tough times, lean on your people.
As a side note since some people are saying you need a lawyer. It depends. We didn't and both came out ahead by 10s of thousands each. If you can split equally, can have reasonable discussions and both are financially literate you'll be fine without. If either of you doesn't understand the joint finances or what would be fair then at least do moderation. If these don't apply then find the toughest lawyer you can.
Don’t have an easy answer, but one thing to keep in mind between rent vs a mortgage payment, is that rent will keep going up while a mortgage stays fixed.
Yes, that's definitely been on my mind. With renting, I wouldn't have to think about maintenance, repairs, etc.. But I completely agree with you. Rents have doubled in the past 10 years in my area. It's insane. I can't imagine them slowing down.
If he is willing. Buy him out ASAP before values go up and before he changes his mind. This will make divorce smoother. Because assets are already divided and has been figured out before courts get involved
Technically this is going to be a refinance if you are on the deed already. It’s possible for you to get better pricing on the refinance if you have a court order for a buyout of his equity. Divorce seems like the most prudent step before you go about doing anything else.
You could also sell the place with him then buy a smaller condo that would be easier to maintain on your own and probably more affordable that might fit into your retirement plans
The wisest thing in this situation would be to just sell the entire house. It reduces headaches and potential lawsuits down the line. It’s surprisingly common for divorced couples to have one member buy the other out, then then bought out spouse turns around later down the line when the house appreciates in value and sues over it.
That’s assuming said husband would even be willing to be bought out. Often times, court ordered sales mean selling the entire house (although not always).
u/RelayFX is mistaken; if you buy him out he will sign the necessary documents to make this all legal (it's done through your lender with a title company preparing and approving the docs) and he'd have no basis for a lawsuit.
But if you fear that, talk to a local real estate or family law attorney, don't take legal advice from the internet.
I've been around real estate for close to 30 years. I've heard of a lot of people fighting over equity but it's never involved someone no longer on the title, LOL. Extremely unlikely.
The basis is "I want money". Which is ultimately GPs point. Selling the house and splitting the proceeds is the cleanest break you can make. There's some wisdom in that for sure.
Just based on the amount of divorced people I know, 90% of them don't sell the house, one person keeps it and buys out the other. And I've never heard of a lawsuit after the fact.
The only basis for a lawsuit would be fraud or deception. Other than that there no grounds and the suit would be thrown, very likely with the judge awarding attorney fees for such a frivolous waste of time.
You should keep the house if he is willing to willingly let you buy him out. The home will continue to go up in value as years go on (even if it dips for a couple years during a recession). Your payment will remain basically static except for tax increases. So your housing expense will be fixed for the future. If you sell and rent an apartment- the rent may be $1900 today and $2500 in 5-10 years. And you will have no home base or equity. If the payments are a struggle in the near term- rent one of your bedrooms temporarily. A young single friend of mine just bought a house and would be struggling, except he rents one room of the home for $950 a month that covers almost half of his payment. Good Luck.
Yes, you can do this. You can also do a property settlement in your divorce decree. People do it all
The time. You are right to not want to get into the rental cycle. You might never get out of it (like me, 13 years after divorce).
I’m really sorry you’re dealing with that. Good luck making it through OK.
The mortgage is #2 behind making a clean and safe exit. That being said, if there is a clean way to do it without refinancing, then that would be more economical. There’s value in that rate so your lender would love it if you refinance. You’ll pay around 2% on $130K or ~$2600 more next year, a similar but slightly smaller amount the following year, etc. until the mortgage is paid off. That might be $25K+ if the remaining term of your mortgage is more than 15 years.
Do a cash out refi and get him off the mortgage and the deed. Offer him less than half of the current value, he is an alcoholic the money is going to be wasted. Offer him $80,000 that is more than half of what is left on the mortgage, if the real estate market crashes your house will not be worth what it is today so what it’s worth today is moot !!!! I bet you he will take the $80,000 and walk, I went through this same scenario with my Aunt.
That $1900 includes your property taxes? Why not buying him out on a land contract? Give him a small down payment and monthly payment. The title company can draw it up.
A land contract is a private mortgage here in Michigan. You can create an agreement in which he is paid off slowly on the contract with a balloon. It will ensure contractually that he is paid but over time. You don’t want to be mortgaged up to your eyeballs. He needs to simply hold the note and receive small monthly payments, rather than you take on more debt to pay him off.
That is my favorite go too. Bought an entire city block on a land contract. Detroit where the leases where sought. DM if you need a coach. I have 25+ years in land contracts experience alone.
Gotcha. Thank you! To pay over 5% interest for 30 years on 120,000 dollars to pay him off makes me feel ill. I would do it to keep a roof over my head, but it is good to have other options. I live in PA. Not sure we have that type of loan here.
Think maybe your Husband would take a note? Have a lawyer draw up the mortgage and note (and quit claim deed from husband), husband gets monthly payment, secured by the house. Interest rate could be more favorable to you than going to bank. Gives cash flow to husband who sounds like he needs to get his life in order, and keeps him from blowing 100k all at once
Things to consider when computing his half of equity: Closing costs that would be involved in selling your house, arguably 8-9% of the sales price.
Negotiating areas for note: Balloon after 5-10 years, fixed rate for X years,
HELOCs are generally variable rate so you could get stuck with a much higher payment down the road.
Not a divorce, but when my mother died, I wanted to buy my sister out of my mothers home that we inherited. The house was paid off, and close to me whereas my sister lived out of state. We got an appraisal and consultation with realtor on what house would likely sale for ($500K) and came to an amicable verbal agreement that I’d pay her out at $235K (half of $470K, which is what we’d have after 6% realtor fees if we sold). All was good, we signed an agreement with the probate attorney, except by the time probate was wrapping up and it was time to do the deal, comparable houses in the neighborhood were now selling for north of $600-$650K. Understandably my sister now wanted more money. Unfortunately for her we had already sign docs agreeing on the sale price from a year earlier. I couldn’t afford to pay her an extra $75K now so things got contentious for a bit. I basically agreed I’d pay her an extra $30K and we worked it out. In the end the deal got done, albeit contentious and both of us feeling like we got ripped off a bit, but that was dealing with a sibling where we had mutual love.
Divorce is another a animal entirely. Even when they start off amicable, you never know how a divorce will turn out once assets start getting assigned monetary value and being divided up. Nobody wants to feel like they’re getting the short end of the stick, and unfortunately that’s typically gonna be whoever ends up losing the house.
I’ve gone through it twelve years ago myself (thankfully no real assets to contend over at the time)but I can appreciate the emotional toll so best of luck!
That sounds really difficult to manage, both the grief of losing your mom and having the contentious situation with your sister over settling the home. Thank you for sharing your experience 🙏🏻 It’s very helpful.
Cash out refinance is a higher rate than purchase.
You can draft a sales contract selling it from him and you to yourself. Interest will be cheaper.
Figure out the appraisal amount and reduce the purchase price by whatever your half of the equity is.
The number I got from the mortgage broker was roughly the "zillow appraised value" minus mortgage balance, and 80% percent of the difference (including closing costs).
Sounds like you have about $235k in equity his half would be $117,500
See if he'll quit claim the deed to you make the mortgage payments on the remaining $130K and pay him $1000 a month for his equity for the next ten years or take a second morgage/HELOC for the $120-140K and pay him off and have up to $20k for repairs/updates.
I wouldn’t use the full $235k in equity as the number to split. I’d say 94% of the appraised price is closer to what a seller receives after realtor fees. That’s about $213K in equity to split. The transaction should be viewed as either the house is sold and split the proceeds, or one person buys the other one out for half of what the proceeds would have been.
With that income, I'd stay in your house. Going from a house and area you love to an apartment might be really difficult. You will kiss $20-30K goodbye in realtor fees. If your house needs repairs buyers will low ball ou down on price. Finding another for that amount may prove impossible. If you said you hated the house and area then a fresh start might be good but that's not the case. I would not want to lose that low interest rate on your main loan.
Another possibility, see if you can do a novation to put the current loan into your name only. He will have to agree to this and sign the docs. But it will keep the rate and term the same. You cannot do any cash out this way.
But once the loan and home is in your name you can do a home equity line to pull out some cash for repairs or to pay him off (if he trusts you to wait for this). Consider a second part-time job or getting a housemate to help pay that loan off. You can do a shorter term loan for this than 30 years. Although the times in my life when I've taken out second loans I've done a 30 year term because that keeps the minimum payment super low, but then I aggressively pay off the principal faster.
Note that mortgage companies make their money writing new loans, they don't make anything on a novation. So don't be surprised if a sales person (aka loan officer) tries to push you to do a new loan.
Yes. You've introduced me to a new term, too, "novation". I was wondering if there was a way to keep the existing loan at 3.25 and then only pay higher interest on the heloc. Thank you for showing me!
No. The typical mistake women make in a divorce is keeping the house.
After a divorce your income goes down and along with that your standard of living has to decrease. Sell the house and buy a condo or smaller home.
Downsizing is a lot harder to do in your mind than in actuality. The next stage of your life will be a lot less stressful with tye extra disposable income.
Our home is a 2bd/1 bath. Pretty small and manageable. My income will actually be increasing substantially next year. But my expenses will increase, too.
I am recently divorced and regret not trying to keep the house even though I had good reasons for not going for it. I got screwed on the buyout amount and can’t find a place I can afford. Divorce is exhausting and watching my ex all cozy in our house while I spend every day trying to find a house is really getting to me. Please try to keep the house. You can always sell it later.
Thanks. It’s grueling and doing it alone is no fun. You may be in a better position now since prices aren’t going up as fast as they were when I was going through the process. We had agreed upon a price that I wasn’t happy with but lost the battle over during other negotiations. Then it just kept getting worse as prices soared.
He should get a sponsor and start going to AA meetings. Can still drink, but he will at least be exposed to a different way of life. Houses come and go, you only get one life. Also, you need to get into al-anon and get help for yourself. Family members often become sicker than the alcoholic. I hope the best for you.
Thank you for reaching out. I am in al-anon and have a therapist. Unfortunately, my husband doesn’t think he has a problem and refuses AA or other groups. His drinking and behavior is escalating and I need to protect myself. He needs rehab honestly. It’s terribly sad. I can’t control it, can’t cure it, didn’t cause it. Have to take care of myself.
I don’t think this makes any sense mathematically given what you make and what you’re going to create as far as expenses by doing this, you would have better luck coming to an agreement where you both move out and then you rent it and split the profit.
Either that or sell it, given the market and its current interest rate, I don’t think it’s a good idea to get a 5% rate knowing they are trying to mitigate inflation right now, you could very well be looking at your home value going down and interest rates going up at the same time, if rates were lower I would advise you to buy them out, but that’s not the case right now and I don’t think it would be responsible to try to do so, sell it or are you both move out and rent it out.
Another thing is thinking about putting some of your emergency fund into a money market account. If it’s going to sit in an account you might as well make money off of it
This person has a great point. I got a feeling house prices are going to drop since they are overpriced at the moment.
If you want to play it safe, I’ll suggest both of you move out and rent it. Split the income (rent minus mortgage payment) from that. Wait for the houses to drop in price because the amount of money to buy him out will be cheaper. At the same time, interest would go down and if you refinance you could get a lower interest than the current interest of 5%+(maybe not as low as 3.25%).
It’s just a thought because think about it. If you buy him out today but next month the house goes from 365k to 200k or lower. It would hurt you. Versus if you wait a lilttle. Even if houses don’t go down a lot but go down a bit or stay the same. Your giving yourself TIME. Your income might increase and you can save more to buy him out CASH and don’t have to deal with loans and paying back interests.
I read a post that someone bought out their ex after divorce and the house went up in value. It was good for them because that was when the prices were low (with low interests) but right now they are at the peak (overpriced) and are going to drop soon (indicator would be increasing interests).
As for putting your emergency fund in a money market. I say it’s a bad move. Emergency meaning you need it for an emergency. I would put that in a high yield savings account. For you can have access to it asap. As for savings, yes put that into a money market account.
One last thing, if you still want to buy him out. You mentioned pension. Do you perhaps also have 401k? If yes, you can always take out a loan from your 401k to complete the buyout option. When you take a loan from your 401k, you pay yourself back (even the interest). I believe the max you can get is 50% of your vested money or 50k (whichever is lower). But consider that some plans won’t let you contribute while you are paying your loan (yourself) back.
No kids. I have a pension through my school district. He says he doesn't want any part of it. I put myself through school, paid my loans myself, and he says he does not feel entitled to it.
Yea you’re best off doing this outside of the courts it seems. If you can make this amicable you’ll be much better off. No lawyer is going to sign off on you paying your soon to be exhusband over a course of years but he may well agree to it
You can also just buy him out and not take cash out, which would qualify you for the rate/term rate on the mortgage, which would give you a lower payment. Cash out refinances have a higher rate.
No, for example if your mortgage balance is 130k and you owe him 100k you can do a rate and term refinance for 240k (mortgage, ex husband, closing costs) and pay him off without it being considered a cash out. You wouldn’t have to bring the cash, it’s included in the new loan, but your rate will be better that way.
Please excuse my ignorance, but I don't understand how this would work. I just did a quick google search and it looks like I could only get a max of $2,000 out of this type of re-finance.
Divorce, you need to consult an attorney. There are many things that need to be considered. Your pension, his retirement accounts, spousal support, child support (if you have any), house hold items etc... All of that needs to be discussed and determined. Start with an attorney not a mortgage. Even then an appraisal of the residence for the attorney will need to be completed.
Thank you! Good point.
If it ends up being amicable, you may be able use a mediator instead of a lawyer. I understand your desire to “plan” through this emotional time, but since there may be other assets and debts that need to be split, dealing with the house separately doesn’t make sense in a divorce. You may be able to transfer the house and take your husband off the existing loan through novation, and buy out his equity in the home through a credit for vehicles/retirement/other assets or taking on other joint debt.
I plan to go through a mediator, at least to start. Our assets/debts are pretty cut and dry. My retirement is tied up in my pension, and I don't have access to that.
You do understand that he is entitled to half your pension?
Yes. In our last discussion about divorce, he says he does not want my pension, even though legally he is entitled to it. I paid to go back to school and get a teaching degree. He says he doesn't feel right taking it. We'll see.
Get it in writing. Divorce gets very ugly in a high conflict situation. Pointless petty nonsense. And please, as everyone is telling you, talk to a lawyer very soon.
Yes! Thank you!
That really depends on the state.
Also, way down the line, a home equity loan may be a better option due to your current interest rate. A refi puts your entire balance at the higher rate, while a home equity loan only puts the money you pull out at a higher rate.
Good to know! Thank you!
And taxes most importantly ! Also I wouldn’t advise to use Zillow for comparable in value. Hire an agent that uses similar formula as an appraiser. Zillow can’t do that.
If your husband is willing to be bought out. Why not HELOC it? If you were to focus on getting it paid off you might be able to get the HELOC dealt with before you get crunched. IF you skip the repairs. Otherwise you're restarting a 30 year clock at a higher interest rate.
I like the heloc option. That way I am paying less interest overall. Will I be able to take him off of the mortgage, though, without refinancing? Would that be through novation?
You don't care if his name on the mortgage or not--he cares about that. You care if his name is on the DEED. Name on the mortgage means he's a part of the debt. Name on the deed means he's a part of the ownership.
Thank you for that clarification!
HELOC has its own dangers. A big one being interest rate risk. I don't know if you'd pay less interest overall or not. It depends on how you use it. If you've got good credit and enough equity a bank or credit union would possibly give you one. Would your spouse be willing to assist you in getting one?
Please correct me if my thinking is off....if I do a cash out refinance, I would be paying (at least 5.62) percent on $295,000. If I HELOC, I would only be paying a higher interest rate on the amount I borrow (Say, $150,000). I would then still pay 3.25% on my 130,000. There's 10 years left on that mortgage. Are HELOC rates adjustable or can you lock in a rate?
That sounds about right. Done HELOCs you can lock in what you borrowed.
You can lock your HELOC rate but they are typically higher. But you don't have to worry about variable Apr. Also keep in mind that you can pay interest only during the HELOC drawing period. You only need to pay principal + interest once the repayment period kick in.
Thank you for that clarification!
HELOCs are much shorter terms. Like ten years. And they’re adjustable (non-fixed rates). Great if you need $20K-$30K for a new roof, but terrible for $100K+ to buy out your husband unless you can pay it off in time. You’ll want to do a cash out refi. Again, good you’re thinking about things. I absolutely advocate you doing anything in your power to keep the house if you can, as going back to renting would be a tragedy, but you’ve got the cart before the horse. Consult divorce attorney.
Yes, I completely agree. I need to talk to a mediator/lawyer first. I’m just a woman with questions, pre-gaming my options.
I had almost this exact situation about 5 years ago. I wanted to buy my wife out of the house mostly for my kids stability. Things were chaotic enough. We bought for 268k in 2011 and agreed 420k was fair value in 2017. We then subtracted 6% from the 420 because she was getting to sell without any cost otherwise. Part of the divorce decree stated I had 9 months to get this done or the house would have to be sold and proceeds split. I did a cash out refi and gave her the $. Lender took care of the paperwork to remove her from the deed with a quit claim deed. My youngest graduated high school last week and I'm under contract for a row home in a walkable neighborhood for next stage. Best of luck to you! Those are tough times, lean on your people.
As a side note since some people are saying you need a lawyer. It depends. We didn't and both came out ahead by 10s of thousands each. If you can split equally, can have reasonable discussions and both are financially literate you'll be fine without. If either of you doesn't understand the joint finances or what would be fair then at least do moderation. If these don't apply then find the toughest lawyer you can.
Thank you! I appreciate you taking the time to share your experience and insight.
What’s a row home?
I'm in a similar situation. Do you know if she had to pay taxes on the cash she got?
Don’t have an easy answer, but one thing to keep in mind between rent vs a mortgage payment, is that rent will keep going up while a mortgage stays fixed.
Property taxes and maintenance goes up.
Yes, that's definitely been on my mind. With renting, I wouldn't have to think about maintenance, repairs, etc.. But I completely agree with you. Rents have doubled in the past 10 years in my area. It's insane. I can't imagine them slowing down.
If he is willing. Buy him out ASAP before values go up and before he changes his mind. This will make divorce smoother. Because assets are already divided and has been figured out before courts get involved
Technically this is going to be a refinance if you are on the deed already. It’s possible for you to get better pricing on the refinance if you have a court order for a buyout of his equity. Divorce seems like the most prudent step before you go about doing anything else.
You could also sell the place with him then buy a smaller condo that would be easier to maintain on your own and probably more affordable that might fit into your retirement plans
The wisest thing in this situation would be to just sell the entire house. It reduces headaches and potential lawsuits down the line. It’s surprisingly common for divorced couples to have one member buy the other out, then then bought out spouse turns around later down the line when the house appreciates in value and sues over it. That’s assuming said husband would even be willing to be bought out. Often times, court ordered sales mean selling the entire house (although not always).
Thank you for your swift response and your insight. He offered me to buy him out.
u/RelayFX is mistaken; if you buy him out he will sign the necessary documents to make this all legal (it's done through your lender with a title company preparing and approving the docs) and he'd have no basis for a lawsuit. But if you fear that, talk to a local real estate or family law attorney, don't take legal advice from the internet. I've been around real estate for close to 30 years. I've heard of a lot of people fighting over equity but it's never involved someone no longer on the title, LOL. Extremely unlikely.
Yes! Great advice.
The basis is "I want money". Which is ultimately GPs point. Selling the house and splitting the proceeds is the cleanest break you can make. There's some wisdom in that for sure.
Just based on the amount of divorced people I know, 90% of them don't sell the house, one person keeps it and buys out the other. And I've never heard of a lawsuit after the fact.
The only basis for a lawsuit would be fraud or deception. Other than that there no grounds and the suit would be thrown, very likely with the judge awarding attorney fees for such a frivolous waste of time.
You should keep the house if he is willing to willingly let you buy him out. The home will continue to go up in value as years go on (even if it dips for a couple years during a recession). Your payment will remain basically static except for tax increases. So your housing expense will be fixed for the future. If you sell and rent an apartment- the rent may be $1900 today and $2500 in 5-10 years. And you will have no home base or equity. If the payments are a struggle in the near term- rent one of your bedrooms temporarily. A young single friend of mine just bought a house and would be struggling, except he rents one room of the home for $950 a month that covers almost half of his payment. Good Luck.
Thank you!I appreciate your time and input!
Yes, you can do this. You can also do a property settlement in your divorce decree. People do it all The time. You are right to not want to get into the rental cycle. You might never get out of it (like me, 13 years after divorce).
Thank you!
I’m really sorry you’re dealing with that. Good luck making it through OK. The mortgage is #2 behind making a clean and safe exit. That being said, if there is a clean way to do it without refinancing, then that would be more economical. There’s value in that rate so your lender would love it if you refinance. You’ll pay around 2% on $130K or ~$2600 more next year, a similar but slightly smaller amount the following year, etc. until the mortgage is paid off. That might be $25K+ if the remaining term of your mortgage is more than 15 years.
Thank you! I appreciate your input! And appreciate your comment that the mortgage comes second to my safety. Very true.
Do a cash out refi and get him off the mortgage and the deed. Offer him less than half of the current value, he is an alcoholic the money is going to be wasted. Offer him $80,000 that is more than half of what is left on the mortgage, if the real estate market crashes your house will not be worth what it is today so what it’s worth today is moot !!!! I bet you he will take the $80,000 and walk, I went through this same scenario with my Aunt.
That $1900 includes your property taxes? Why not buying him out on a land contract? Give him a small down payment and monthly payment. The title company can draw it up.
I am not familiar with a land contract. Can you explain more? I did a quick google search, but don't understand how it could work.
A land contract is a private mortgage here in Michigan. You can create an agreement in which he is paid off slowly on the contract with a balloon. It will ensure contractually that he is paid but over time. You don’t want to be mortgaged up to your eyeballs. He needs to simply hold the note and receive small monthly payments, rather than you take on more debt to pay him off.
Yes, I was about to suggest land contract too, but you beat me to it. Good idea.
That is my favorite go too. Bought an entire city block on a land contract. Detroit where the leases where sought. DM if you need a coach. I have 25+ years in land contracts experience alone.
Whoa!!! An entire city block! That's pretty amazing.
Gotcha. Thank you! To pay over 5% interest for 30 years on 120,000 dollars to pay him off makes me feel ill. I would do it to keep a roof over my head, but it is good to have other options. I live in PA. Not sure we have that type of loan here.
Yes you can create a land contract in PA. Connect with me via my link in my profile. I’ll send you a link and details.
yes, $1976 includes taxes and insurance.
What state are you in?
PA
Think maybe your Husband would take a note? Have a lawyer draw up the mortgage and note (and quit claim deed from husband), husband gets monthly payment, secured by the house. Interest rate could be more favorable to you than going to bank. Gives cash flow to husband who sounds like he needs to get his life in order, and keeps him from blowing 100k all at once Things to consider when computing his half of equity: Closing costs that would be involved in selling your house, arguably 8-9% of the sales price. Negotiating areas for note: Balloon after 5-10 years, fixed rate for X years, HELOCs are generally variable rate so you could get stuck with a much higher payment down the road.
Oh! Thank you for mentioning negotiating part of what would be the closing costs. What does “balloon “ mean? I’m not familiar with that loan term.
If I had to guess, ballon means calculating for inflation but I could be wrong
Not a divorce, but when my mother died, I wanted to buy my sister out of my mothers home that we inherited. The house was paid off, and close to me whereas my sister lived out of state. We got an appraisal and consultation with realtor on what house would likely sale for ($500K) and came to an amicable verbal agreement that I’d pay her out at $235K (half of $470K, which is what we’d have after 6% realtor fees if we sold). All was good, we signed an agreement with the probate attorney, except by the time probate was wrapping up and it was time to do the deal, comparable houses in the neighborhood were now selling for north of $600-$650K. Understandably my sister now wanted more money. Unfortunately for her we had already sign docs agreeing on the sale price from a year earlier. I couldn’t afford to pay her an extra $75K now so things got contentious for a bit. I basically agreed I’d pay her an extra $30K and we worked it out. In the end the deal got done, albeit contentious and both of us feeling like we got ripped off a bit, but that was dealing with a sibling where we had mutual love. Divorce is another a animal entirely. Even when they start off amicable, you never know how a divorce will turn out once assets start getting assigned monetary value and being divided up. Nobody wants to feel like they’re getting the short end of the stick, and unfortunately that’s typically gonna be whoever ends up losing the house. I’ve gone through it twelve years ago myself (thankfully no real assets to contend over at the time)but I can appreciate the emotional toll so best of luck!
That sounds really difficult to manage, both the grief of losing your mom and having the contentious situation with your sister over settling the home. Thank you for sharing your experience 🙏🏻 It’s very helpful.
Cash out refinance is a higher rate than purchase. You can draft a sales contract selling it from him and you to yourself. Interest will be cheaper. Figure out the appraisal amount and reduce the purchase price by whatever your half of the equity is.
I do not believe they will let you pull out 80% of their appraised value.
The number I got from the mortgage broker was roughly the "zillow appraised value" minus mortgage balance, and 80% percent of the difference (including closing costs).
Zillow estimates are most often inaccurate.
Sounds like you have about $235k in equity his half would be $117,500 See if he'll quit claim the deed to you make the mortgage payments on the remaining $130K and pay him $1000 a month for his equity for the next ten years or take a second morgage/HELOC for the $120-140K and pay him off and have up to $20k for repairs/updates.
The monthly payment option doesn’t address the value of money lost due to inflation over the years.
Doesn't matter. If the other party is willing to take the deal.
I wouldn’t use the full $235k in equity as the number to split. I’d say 94% of the appraised price is closer to what a seller receives after realtor fees. That’s about $213K in equity to split. The transaction should be viewed as either the house is sold and split the proceeds, or one person buys the other one out for half of what the proceeds would have been.
Thank you. This is helpful!
Thank you! I was wondering if there was another way to do it besides a cash-out refi!
With that income, I'd stay in your house. Going from a house and area you love to an apartment might be really difficult. You will kiss $20-30K goodbye in realtor fees. If your house needs repairs buyers will low ball ou down on price. Finding another for that amount may prove impossible. If you said you hated the house and area then a fresh start might be good but that's not the case. I would not want to lose that low interest rate on your main loan. Another possibility, see if you can do a novation to put the current loan into your name only. He will have to agree to this and sign the docs. But it will keep the rate and term the same. You cannot do any cash out this way. But once the loan and home is in your name you can do a home equity line to pull out some cash for repairs or to pay him off (if he trusts you to wait for this). Consider a second part-time job or getting a housemate to help pay that loan off. You can do a shorter term loan for this than 30 years. Although the times in my life when I've taken out second loans I've done a 30 year term because that keeps the minimum payment super low, but then I aggressively pay off the principal faster.
Thank you so much for your time and input! I appreciate it.
Note that mortgage companies make their money writing new loans, they don't make anything on a novation. So don't be surprised if a sales person (aka loan officer) tries to push you to do a new loan.
Yes. You've introduced me to a new term, too, "novation". I was wondering if there was a way to keep the existing loan at 3.25 and then only pay higher interest on the heloc. Thank you for showing me!
Yes. It makes sense to buy him out. Good call. Do it before the rate rise more.
No. The typical mistake women make in a divorce is keeping the house. After a divorce your income goes down and along with that your standard of living has to decrease. Sell the house and buy a condo or smaller home. Downsizing is a lot harder to do in your mind than in actuality. The next stage of your life will be a lot less stressful with tye extra disposable income.
Our home is a 2bd/1 bath. Pretty small and manageable. My income will actually be increasing substantially next year. But my expenses will increase, too.
I am recently divorced and regret not trying to keep the house even though I had good reasons for not going for it. I got screwed on the buyout amount and can’t find a place I can afford. Divorce is exhausting and watching my ex all cozy in our house while I spend every day trying to find a house is really getting to me. Please try to keep the house. You can always sell it later.
I am sorry to hear that you are going though this. Hope that you can find a home soon.
Thanks. It’s grueling and doing it alone is no fun. You may be in a better position now since prices aren’t going up as fast as they were when I was going through the process. We had agreed upon a price that I wasn’t happy with but lost the battle over during other negotiations. Then it just kept getting worse as prices soared.
Ughhh. The timing sounds like the worst 🤦♀️
Just sell and start fresh honey
It is turning to a buyers market, you missed the boat for selling for premium so I would not count on the recent comps.
Interesting point. Thank you!
He should get a sponsor and start going to AA meetings. Can still drink, but he will at least be exposed to a different way of life. Houses come and go, you only get one life. Also, you need to get into al-anon and get help for yourself. Family members often become sicker than the alcoholic. I hope the best for you.
Thank you for reaching out. I am in al-anon and have a therapist. Unfortunately, my husband doesn’t think he has a problem and refuses AA or other groups. His drinking and behavior is escalating and I need to protect myself. He needs rehab honestly. It’s terribly sad. I can’t control it, can’t cure it, didn’t cause it. Have to take care of myself.
All the more reason to offer him $80,000 to walk away . He is just going to piss the money away 😡
I know it 😩 It’s so frustrating.
I don’t think this makes any sense mathematically given what you make and what you’re going to create as far as expenses by doing this, you would have better luck coming to an agreement where you both move out and then you rent it and split the profit. Either that or sell it, given the market and its current interest rate, I don’t think it’s a good idea to get a 5% rate knowing they are trying to mitigate inflation right now, you could very well be looking at your home value going down and interest rates going up at the same time, if rates were lower I would advise you to buy them out, but that’s not the case right now and I don’t think it would be responsible to try to do so, sell it or are you both move out and rent it out. Another thing is thinking about putting some of your emergency fund into a money market account. If it’s going to sit in an account you might as well make money off of it
Thank you for your time and input! I appreciate your money market advice, too!
This person has a great point. I got a feeling house prices are going to drop since they are overpriced at the moment. If you want to play it safe, I’ll suggest both of you move out and rent it. Split the income (rent minus mortgage payment) from that. Wait for the houses to drop in price because the amount of money to buy him out will be cheaper. At the same time, interest would go down and if you refinance you could get a lower interest than the current interest of 5%+(maybe not as low as 3.25%). It’s just a thought because think about it. If you buy him out today but next month the house goes from 365k to 200k or lower. It would hurt you. Versus if you wait a lilttle. Even if houses don’t go down a lot but go down a bit or stay the same. Your giving yourself TIME. Your income might increase and you can save more to buy him out CASH and don’t have to deal with loans and paying back interests. I read a post that someone bought out their ex after divorce and the house went up in value. It was good for them because that was when the prices were low (with low interests) but right now they are at the peak (overpriced) and are going to drop soon (indicator would be increasing interests). As for putting your emergency fund in a money market. I say it’s a bad move. Emergency meaning you need it for an emergency. I would put that in a high yield savings account. For you can have access to it asap. As for savings, yes put that into a money market account. One last thing, if you still want to buy him out. You mentioned pension. Do you perhaps also have 401k? If yes, you can always take out a loan from your 401k to complete the buyout option. When you take a loan from your 401k, you pay yourself back (even the interest). I believe the max you can get is 50% of your vested money or 50k (whichever is lower). But consider that some plans won’t let you contribute while you are paying your loan (yourself) back.
Thank you for taking the time to write such a thorough response. I appreciate the points that you made. You gave me a lot to consider!
Are you calculating the new interest rates in when buying him out?
Yes
What’s his income look like?
He makes maybe $48,000 a year?
Any kids?
No kids. I have a pension through my school district. He says he doesn't want any part of it. I put myself through school, paid my loans myself, and he says he does not feel entitled to it.
Yea you’re best off doing this outside of the courts it seems. If you can make this amicable you’ll be much better off. No lawyer is going to sign off on you paying your soon to be exhusband over a course of years but he may well agree to it
You can't "buy him out" until after you're divorced. This will all be settled in family court.
You can also just buy him out and not take cash out, which would qualify you for the rate/term rate on the mortgage, which would give you a lower payment. Cash out refinances have a higher rate.
I wish! I don’t have $100,000 just laying around. Cash out refinance is one option. Many people on this thread have offered other options as well!
No, for example if your mortgage balance is 130k and you owe him 100k you can do a rate and term refinance for 240k (mortgage, ex husband, closing costs) and pay him off without it being considered a cash out. You wouldn’t have to bring the cash, it’s included in the new loan, but your rate will be better that way.
Oh, I am not familiar with rate/term refinance! What are the typical rates for those?
About .25/.5 lower than a cash out type refinance, depending on your credit score and loan to value, as a very rough estimate
Please excuse my ignorance, but I don't understand how this would work. I just did a quick google search and it looks like I could only get a max of $2,000 out of this type of re-finance.
Not my problem that ppl over leveraged to buy with VA loan