Author Topic: Sister getting a divorce - not sure what to do about the house  (Read 1569 times)

shariden

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My sister is getting a divorce.  She wants to take the house, which (to my knowledge) she and her soon-to-be-ex still owe over $100,000 on.  She doesn't have a very good job right now (making about $13 /hr) but has an interview this upcoming week for a much better paying job (+/- $50k).  She also has some spending issues, but to her credit that's something that she's working on improving.  Presently she is living with our mother while the divorce is finalized, and that arrangement is working out fine for the time being.

My sister is already in tens of thousands of dollars of college and credit card debt, and has been struggling to find work in her field.  She also hasn't put a single penny into retirement savings. 

Personally, I think my sister should stay at home with our mother until she gets herself sorted out mentally and financially. So instead of her taking on the rest of the mortgage, I suggested that she should instead start putting away the same amount of money into a 401k. I argue that the value would grow much faster and be a better investment for her than real estate, at this point in her life.  It also wouldn't come with the stress of homeownership, which contributed to her anxiety and depression.  My mom argues that taking on the mortgage is 'safer' than investing in the stock market.  I'll grant her that it's a safer investment, but I'm not sure it's the better investment.

What does the MMM community think about this situation?
« Last Edit: April 20, 2018, 09:22:06 AM by sheradon »

MayDay

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Re: Sister getting a divorce - not sure what to do about the house
« Reply #1 on: April 20, 2018, 07:38:55 AM »
It depends so much on the specifics.

My SIL was in a similar situation. She didn't keep the house (her ex did). The divorce happened right when the housing market was rebounding, and her ex now has a lot of equity. Meanwhile she has lived at home for 6 years, supposed to be saving (but not really changing her ways).

The bottom line is you don't know if she will really change. If she can cash flow the mortgage now despite her debt, and stop getting in new debt, she'll eventually pay stuff down .

In the case of my SIL she won't/can't save, so being cash poor because of a mortgage is probably better than blowing all her extra money.

We'd need a lot more info to really know which is best for your sister, most importantly will she really save if she lives at home?

jlcnuke

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Re: Sister getting a divorce - not sure what to do about the house
« Reply #2 on: April 20, 2018, 07:59:19 AM »
Not enough information to make an informed decision imo.  What is "owed" on the mortgage doesn't mean much unless she is going to refinance (not a guarantee, my brother's ex never refinanced their mortgage), so whether she could afford it can't be answered. Additionally, making $13/hour vs making $50k/year is a huge difference. If she was making $50k/year she could probably refinance that $100k and have a nice low 15-year mortgage payment (PITI) around $1k/month (quite affordable on $50k/year) with today's rates, and then have a paid off home at 40 years old.

If she "takes" the house, though, it's likely their primary asset and if it has significant equity she may not be able to give her ex "his half" and thus it may not be an option.

We also don't know what rent would be in that area (and the odds are that she won't want to live with her mom for an extended period of time, regardless of how much you think it will be good for her) so there's no way to compare those costs vs taking on the mortgage.

etc etc, just too many variables, but at $13/hour, she can't likely afford the place on her own.

Maenad

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Re: Sister getting a divorce - not sure what to do about the house
« Reply #3 on: April 20, 2018, 08:16:39 AM »
Also, she has an interview for a much better paying job. This is pretty far away from "has a much better paying job".

Counting on a financial situation improving in the future gets people into so much trouble when they start spending that money now, before things have actually gotten better. What she has right now is $13/hour. That's what she needs to base her life on.

trollwithamustache

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Re: Sister getting a divorce - not sure what to do about the house
« Reply #4 on: April 20, 2018, 08:21:22 AM »
so... financially everyone is going to layout why it makes sense to stay at home with mom. And that's true in spreadsheet land.

Sounds like the sister has some growing up to do, and that might not happen at home. What about ditiching the house and living on her own in a cheap apartment while sorting things out?

plog

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Re: Sister getting a divorce - not sure what to do about the house
« Reply #5 on: April 20, 2018, 08:41:49 AM »
She should not (and probably can't) take on the home by herself. 

1. No way her husband's lawyer allows her to just take over the current mortgage--best case the condition is she has to put it in her name within X months. 

2.  Even if #1 happens, what about equity?  He's going to want and argue for that unless they are absolutely upside down--if it has 0 equity he's still going to argue it has some equity and for some money on a buy out. How's she going to get him that?

3.  She makes $13 an hour.  Hope for a better tomorrow all you want, but the fact is, there's no way she's getting a mortgage in her name any time soon.

4.  Even if she gets the job, gets the house with a year to refinance, that mortgage payment is going to be right at the limit of what she can afford on that salary with her current debt.  Why put yourself into that situation after such a stressful time?

5.  Leopards and spots.  Some people in this situation will come to jesus about their debt and clean it up.  More will buckle under the stress and relieve it by buying and financing themselves more crap they don't need.  The majority however will keep cruising on without changing anything.


So, in conclusion, she most likely can't do this.  If however a lot of things break her way, she will be able to, but will put herself in a bad spot by doing it.

Another Reader

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Re: Sister getting a divorce - not sure what to do about the house
« Reply #6 on: April 20, 2018, 08:46:37 AM »
There are no children to consider here.  In her shoes, I would sell the house and take half the equity to put into savings.  Split his retirement, whatever it is, as she has none.  She is too young and too broke to hold on to the house at this point.

YttriumNitrate

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Re: Sister getting a divorce - not sure what to do about the house
« Reply #7 on: April 20, 2018, 08:53:38 AM »
Has your sister asked for your advice?

KBecks

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Re: Sister getting a divorce - not sure what to do about the house
« Reply #8 on: April 20, 2018, 09:01:00 AM »
It doesn't sound like she's financially able to support owning a house.

jlcnuke

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Re: Sister getting a divorce - not sure what to do about the house
« Reply #9 on: April 20, 2018, 09:08:51 AM »
She should not (and probably can't) take on the home by herself. 

1. No way her husband's lawyer allows her to just take over the current mortgage--best case the condition is she has to put it in her name within X months. 


So, in conclusion, she most likely can't do this.  If however a lot of things break her way, she will be able to, but will put herself in a bad spot by doing it.

#1 happens all the time FYI. It happened to my brother (next to no equity, she got the house and the kids and keeps the mortgage in both their names). The only requirement the state would allow was that she make a "reasonable attempt to refinance". She applied, was denied (insufficient credit and income) and met the legal requirement for that reasonable attempt. He was still required to quitclaim the deed, so the house is hers 100%, but the mortgage is still legally on both of them (he has some other claim against her if she defaults or something though, I don't know the specifics, but apparently it's pretty common according to the lawyers he talked to including the one he hired for the divorce).
« Last Edit: April 20, 2018, 09:10:33 AM by jlcnuke »

Aminul

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Re: Sister getting a divorce - not sure what to do about the house
« Reply #10 on: April 20, 2018, 09:48:18 AM »
One benefit of owning a home (paying a mortgage) is forced savings.  While staying with her mother there are fewer reasons to change her spending/saving patterns.  As a home owner she would be forced to put on the big girl pants and make tougher decisions about her spending.

As others have said, we don't have the full picture here.  With that in mind, take my comments with a grain of salt.  It may be that she could not afford the house even with the new job.

honeybbq

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Re: Sister getting a divorce - not sure what to do about the house
« Reply #11 on: April 20, 2018, 09:51:36 AM »
Has your sister asked for your advice?

Right? I mean, we can offer all the great ideas in the world, but in the end, she's going to do what she wants. I would answer differently if this was about *you*.