Author Topic: House during the big D  (Read 4612 times)

Baboo

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House during the big D
« on: January 28, 2013, 02:08:14 PM »
After 11 years of marriage & 3 kids, dh and I have called it quits.  While processing all the emotional issues associated with the split, we're also faced with ensuring that our finances will be sorted fairly.  Without airing all our dirty laundry, the biggest expense, of course, is the house.  In a nutshell, we have a 25 year mortgage at 4.5%.  Remaining balance is $237,999.  HELOC balance is $15,700.  So, call it $255K for both.  Minimum payment for mortgage is $1725 and HELOC is $63.00 per mo.   The home is "valued" at $233,000.  So under water and that's assuming we could realistically sell it for the valued amount. 

Neither of us in totally set on keeping the house, yet also know we may be stuck there.  Currently, we are living "separately" under the same roof until we are able to find alternate living arrangements for one or both of us.  With the hefty mortgage, even the thought of a cheap rental for one of us seems overly taxing financially. 

So, options for us:  try to sell it at a higher price than it's worth (uh huh), one of us stay in the house and refi to a longer term, thereby lowering the payment, or...what???  Our credit is excellent and I'd oh so love to keep it that way. 

Divorce sucks on so many levels.  Any words of advice from fellow mustachians who've failed at marriage?!

sheepstache

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Re: House during the big D
« Reply #1 on: January 28, 2013, 03:04:07 PM »
Maybe I misunderstand but it sounds like the kids are young enough that they will be living with one or both of you?  What would the ideal situation look like for housing for them?

Another Reader

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Re: House during the big D
« Reply #2 on: January 28, 2013, 03:14:03 PM »
Your options if you are in the US are to refi under HARP to get a lower payment if you and the property qualify, rent the house out and have an agreement to do so be part of the property settlement, bring money to the table to sell or refinance it, or one party pays/trades to get out of the property with the current mortgage.  Generally, the last option not a good idea because the spouse that moves out is still on the mortgage unless and until the remaining spouse can refinance. 

Often times the spouse that keeps the primary custody of the kids wants to keep the house.  If that person cannot really afford to do so, it's better to sell and move on rather than struggle to pay the housing bills.

In your shoes, I would find a way to sell it.  It's cleaner that way, even if I had to bring money to the table to do it.

Sorry you (and especially your children) have to go through this.

James

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Re: House during the big D
« Reply #3 on: January 28, 2013, 03:37:40 PM »
I agree with the above, sell it if possible since it's not affordable and that probably won't change.  Stability is good for the kids, but not if it means going broke or living with your ex for years.  Obviously take your local market into consideration and don't do anything rash, but it really don't sound like someplace you should continue to own if at all possible.

smedleyb

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Re: House during the big D
« Reply #4 on: January 28, 2013, 05:26:12 PM »
My only advice is keep your head high, stay positive, and get rid of the house.


meadow lark

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Re: House during the big D
« Reply #5 on: January 28, 2013, 09:21:00 PM »

Divorce doesn't always mean a failed marriage.  After 11 years it may just be a completed marriage. And call your mortgage company and ask about a short sale.  I would make getting out from under that house, and all its memories, a major priority.  It's toxic to you at this point.

secondcor521

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Re: House during the big D
« Reply #6 on: January 29, 2013, 08:33:52 AM »
I agree with the others...sell the house.  Your financial situation will get worse before it gets better because of the cost of two separate households and divorce-related expenses (lawyers, moving, buying a second set of stuff maybe).

Often people think trying to save the house is a good idea for the kids.  It isn't, especially when you guys are barely affording it now.  During my divorce and separation I lived in a nearby apartment, and oddly enough my kids have really great memories of that place.  The house isn't going to matter as much as how you and your STBX take care of the kids during this tough time.

A few points:

1.  Try to sell the house before the divorce.  Sometimes the person who keeps the house through the divorce proceeding "isn't able to" sell it, falls behind on payments, whatever...and drags the other person's finances and credit through the mud.

2.  Talk to the bank(s) who hold your mortgages/HELOC and find out what your options are.  Note that in some cases they'll come after you for the difference and in some cases they won't.  In some cases where they won't, the forgiven debt will be considered income on which you will have to pay income taxes.  Make sure to account for all of this explicitly in the divorce agreement.

3.  Yes, divorce sucks, but you and your kids will be able to survive and live a life after this time passes.  It does get better over time.

2Cor521

Baboo

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Re: House during the big D
« Reply #7 on: January 29, 2013, 11:22:10 AM »
Thanks for all the responses.  The kids are ages 9, 7, and 5.  The ideal housing situation would be to spend a somewhat equitable amount of time with each parent.  Dh is hands on and we're both fairly similar in our parenting styles.  It's important to me that the kids have a close relationship with him, as well.  The house has approx 2000 SF, but honestly is a bit more "lavish" than either of us require (want?) at this point in our lives.  So, if it's at all feasible to sell the house, both of us would be happy to have more modest and less expensive housing.

I thought a Short Sale was only viable if we're in default on our current mortgage?  Our payments have been perfect. So, my next question is, how DO people bring "cash to the table" if they are unable to sell the home for what is owed?  It's possible that we would still owe an additional $50K...which I can't wrap my mind around.  Our retirement funds MAY have that combined, but that's pretty unappealing. We've only recently become of MMM ways, so we do acknowledge that poor decisions got us in this situation (financially).

Another Reader

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Re: House during the big D
« Reply #8 on: January 29, 2013, 05:13:34 PM »
It does not sound like you can keep the house with just one of you paying for it.  Some lenders will work with you if there is no way to keep the house (hardship).  There would still be a hit to your credit.  Do you have a divorce attorney?  That person may have a suggestion on how to approach the lender.  It's easier to recover from a short sale than a foreclosure, and you may be able to purchase something more modest in a couple of years. 

What about renting it out?  Would it be feasible to do this until the market recovers?  Could you cover the mortgage payment and pay for some or all of the expenses with current market rent, allowing for vacancy and collection losses?


herisff

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Re: House during the big D
« Reply #9 on: January 29, 2013, 05:58:39 PM »
Sell the house. I have a friend who divorced & the husband got the house and the mortgage. He was *supposed* to refi the mortgage and the HELOC but never did it - and then when he tried his credit rating was so bad that no one would touch him. To this day, years later, her name is still on that deed and it appears that she is financially responsible for that house (even though the divorce papers so this is not so, the credit bureaus don't care). He also didn't convert the shared credit card (and then couldn't), so that also shows up in her credit report. At this point she is heading towards bankruptcy - some of it she could have prevented, a lot of it she couldn't have.

So protect yourself, sell the house and get your name off the deed.

James

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Re: House during the big D
« Reply #10 on: January 29, 2013, 08:35:23 PM »
During the remaining time you are in the house, if it's going to go on for quite a while, one option is to keep the kids in the house and you and he move back and forth instead of the kids moving around.  You could find an extremely cheap apartment or better yet just a bedroom to rent for whoever is not in the house.  That way you can each have some privacy and separation, while the kids maintain some sense of normalcy and less moving around.

It's important to get some good legal advice regarding what can be done with the house, including all options.  What might work for you is very hard for us to see, but we are certainly open to giving advice once you find out more and have more details.  It does sound like your financial situation will probably get worse before it gets better, the big thing is to limit the down side.  Limit any hole you would need to dig yourself out of, and get yourself into a sustainable situation as soon as possible.

A short sale requires one (or a combination) of two things.  Cash you bring to closing, and any amount the mortgage company will take that is less than owed at closing.  I would guess you are right that the mortgage company isn't going to agree to accept more than owed based on perfect payment history and the fact that your income can cover the payments.  That is where a lawyer comes in, they can advise you based on the laws in your state and the situation you are in financially.  Maybe there is pressure you can put on the mortgage company, and maybe there are funds you can access if needed.  Maybe a 401k loan, selling vehicles, or other options or combinations of them.  I don't see any silver bullet, but gather all your options and pick the best one.  We certainly wish you the best of luck in this difficult time.

Jill the Pill

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Re: House during the big D
« Reply #11 on: January 29, 2013, 08:51:19 PM »
I really feel for you, Baboo.  I did exactly this, 3 kids similar ages, about 5 years ago.  The big difference was our house was worth more than the mortgage.  I kept the house and refinanced to minimize disruption to the kids.  Now, I think we could move without much distress. 

Best wishes to you; it is hard, but it gets much better as you go along. 

catmustache

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Re: House during the big D
« Reply #12 on: January 30, 2013, 11:44:35 AM »
I agree with the above poster who said to get good legal advice and consider all your options. It really depends on your finances. If one of you can afford the home fairly easily, an option we frequently use is to refinance the home in one party's name and have that person responsible for all the payments. Or if one person really wants to keep the home and the house has equity, they might pay the other person half the equity and refinance. Selling is also an option, though that may cause issues of who is responsible for the listing, the upkeep, the taxes before the home sells, etc. I've also seen a few where one person will assume the payments on the home as alimony for a certain number of years...

Again, a good lawyer is probably a good idea, even if just to serve as a jumping off place for potential options in your state.

Divorce is hard. Good luck, it will get better eventually.