Author Topic: Post-divorce finances  (Read 1286 times)

drobots

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Post-divorce finances
« on: December 19, 2019, 08:20:47 PM »
Hi all - I'm in the very early stages of a separation-->divorce and I'm trying to figure out how much of a mortgage is responsible to take on when I find a new place. We're in a medium-high cost of living area but have been mustachian for a while so have enough for a 6 figure down payment on a house. I did a quick budget but I'm sure I'm missing things on the taxes side (how do standard deductions, childcare tax credits, etc factor in)? Of course I plan to max out my retirement account too (sorry for formatting):

                              Annual      Monthly
Monthly Gross Salary      90000.00   7500.00
FICA & Medicare   6.2% and 1.45%   6885.00   573.75
PA Income Tax   3.07%   2763.00   230.25
Federal Income Tax   17%   15300.00   1275.00
Philadelphia Wage Tax   3.8809%   3492.81   291.07
403B      19500.00   1625.00
medical premiums      4838.16   403.18
         
Net take-home pay      37221.03   3101.75

But if I use some of these numbers (income) with a 15 yr mortgage, 3.5% interest rate, and $200k down on some of these online calculators, it thinks I can afford $2700/month on a $475k house!
https://www.nerdwallet.com/mortgages/how-much-house-can-i-afford/calculate-affordability

But obviously 2700/month with 3101 take home is unreasonable. I would rather avoid a 30 yr mortgage but it's unlikely I can find a house in the area I need for less than $350k, and even that's a stretch. So I guess my question is... with a 3101 take home pay, what % do you feel is reasonable to take an aggressive stance on a mortgage?

Thanks for any and all feedback!

six-car-habit

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Re: Post-divorce finances
« Reply #1 on: December 19, 2019, 09:27:28 PM »
 Do you not figure on not having to pay out any alimony / child support  or recieve either one ?

 The old standard was banks would lend on up to 42% of income. But that included everything loan or credit related [ house + car loan, credit card, student loan, etc]

 They will not figure into the mix that you are spending/saving about 27% of income between retirement 403B and medical premiums.

 I think an aggresive # for you would be $1500 a month [ including taxes and insurance ]  assuming you do not drop your 403b % down.

 With 200K down on a 400K house at say 4.5% for 30 years, the payment should be less than 1500.

edit,--mortgage calculator from { financialmentor.com} says with $4000 annual taxes and $1000 annual insurance, your payment would be $1430.
« Last Edit: December 19, 2019, 09:30:48 PM by six-car-habit »

drobots

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Re: Post-divorce finances
« Reply #2 on: December 20, 2019, 06:48:22 AM »
Yeah I was thinking about $1500 month too. Still seems like a lot at almost 50% of take home pay. With 200k down and a 15 year mortgage, that equates to a house value of only ~$335k though, which is going to be tough (but not impossible) to find in the areas within biking distance to work & kid's school. I'd probably do a 30 year mortgage before I'd lower my 403b contributions, but at the same monthly payment that would only get me up to a house value of ~$399k (and I could always pay it back in less than 30 years of course). I'd legally be entitled to child support and a few years of alimony, but am trying to avoid that and opting for a shared bank acct for the kid that my soon to be ex would mostly fund and otherwise equitable division of assets.

Thanks!

GreenIvy66

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Re: Post-divorce finances
« Reply #3 on: December 20, 2019, 09:10:06 AM »
I may be poking the bear here, but these are my thoughts...

OP, have you considered renting an apartment/house for only 1 year, 2 years tops, as an option?

The reason I say this is because you have no way of knowing exactly what your financial situation will look like post-divorce. It may be safer to rent an apartment until the divorce is finalized and the splitting of assets/payment agreements (alimony, child support, etc) are set in stone.

It may not be wise to sign up for a new mortgage without knowing exactly what you will have to work with post-divorce. This seems like a major "counting chickens before they hatch" situation.

I know the idea of paying rent for a year may be unsavory to you, but renting would give you flexibility in the time that you may need it the most.

spartana

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Re: Post-divorce finances
« Reply #4 on: December 20, 2019, 09:27:49 AM »
I may be poking the bear here, but these are my thoughts...

OP, have you considered renting an apartment/house for only 1 year, 2 years tops, as an option?

The reason I say this is because you have no way of knowing exactly what your financial situation will look like post-divorce. It may be safer to rent an apartment until the divorce is finalized and the splitting of assets/payment agreements (alimony, child support, etc) are set in stone.

It may not be wise to sign up for a new mortgage without knowing exactly what you will have to work with post-divorce. This seems like a major "counting chickens before they hatch" situation.

I know the idea of paying rent for a year may be unsavory to you, but renting would give you flexibility in the time that you may need it the most.
I agree with this 100%. OP should rent (or even rent a room or short term monthly place if possible) and see how thing pan out. I'm amicably divorced (also no kids or debt or long term financial ties to ex) but even then there are emotional and financial issues to deal with. Don't burden yourself (yet) with buying a place until the divorce is done and the dust has settled. Things may change. You may get back together (Ex and I did...for awhile), you may chose to live elsewhere, you may meet someone new who has a place you can share, you may end up hating doing all the house repairs and maintenance a single person, or paying to have it done, etc. So waiting awhile is probably wise and will give you perspective on what you really want and need long term.

ETA: Just saw that you will be the parent with primary custody and receive child support and alimony. If that's the case then I can understand not wanting to move often and uproot kids so buying, or staying where you are and buying out your ex's share of the equity (this is what I did since ex was relocating out of state) might be a better option. My ex graciously let me pay him off over 4 years interest free so maybe you can work some kind of deal like that if you're on friendly terms.
« Last Edit: December 20, 2019, 09:34:49 AM by spartana »

Dee18

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Re: Post-divorce finances
« Reply #5 on: December 20, 2019, 09:43:23 AM »
Giving up child support and alimony in exchange for a “shared bank account” sounds risky to me.  I have a dear friend who did not have her son’s 529 account included in the divorce decree.  Her ex developed a drinking problem, lost his job, and used up the 529 account—a fact she discovered right before her son went to college.  I would be sure to consult an attorney in your state about the pros and cons of giving up child support and alimony, which are enforceable through the courts.

cchrissyy

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Re: Post-divorce finances
« Reply #6 on: December 20, 2019, 11:18:12 AM »
I agree with renting instead of rushing into a 15 or 30 year commitment to a particular place. you really do need time to let things settle in emotionally and financially before deciding.

Also I think your idea of passing up child support in favor of a shared bank account leaves you VERY unprotected. You should ask a divorce lawyer. In some states child support is not like alimony which yeah, you can negotiate away. The child is entitled by state law to support and it might not even be within your power to give that up.

honeybbq

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Re: Post-divorce finances
« Reply #7 on: December 20, 2019, 11:50:56 AM »
Why a 15 year mortgage?

La Bibliotecaria Feroz

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Re: Post-divorce finances
« Reply #8 on: December 20, 2019, 03:53:58 PM »
I am divorced and I think that set child support would be preferable--it would be a predictable amount for both of you. I get mine every month from Venmo, of all things.

I have a really good relationship with my ex and even more so with his wife, but it's definitely a case where good boundaries do more good than harm.

And I agree that renting, if you can do it without changing your kids' school, is better. Get used to your new budget and your new life before you commit.

I found it helpful to consult with a lawyer even though I was representing myself. She gave me some wording advice to use and helped me know what I deserved. There were a few things I pushed back against but I was inclined to be waaaay too nice and needed a little bucking up.

Good luck!