Hi all, I wasn't sure if this should go in this subforum or
Real Estate and Landlording, but here it is...
I'm also not sure how much detail to include, not knowing which details are relevant. In a nutshell:
- My soon-to-be DW owns a house since around 2012.
- We're doing a remodel project on it to make it suitable for the two of us to live in, paid for with equity pulled out in a refinance she did for the project.
- Once the remodel project is done, I plan to move in and sell my own house.
- I purchased my house in 2008 (oops) and anticipate ending up with approximately $250,000 to $300,000 from the sale. Calculation: (Zestimate - mortgage principal balance) * 0.9 (The last factor is intended to cover 10% transaction costs, which I remember as a rule of thumb I read somewhere.)
- The current plan is for me to take those proceeds and make a giant payment on the mortgage of DW's house.
- This amount is near enough half the value of DW's house that we both feel this is fair and equitable.
- We are in Washington state, a community property state.
So, my questions, financial (taxes and to a lesser extent, optimizing from an investment perspective) and legal:
Will I incur a big tax liability with this plan?
At what point in this process should the legal marriage take place?
- I'm primarily interested in avoiding shooting myself in the foot tax-wise. Mainly federal but there may be WA state tax considerations as well?
- But also legal ramifications if we were to get divorced. (We're in our forties and have been dating for 12 years, so hopefully not, but who knows.)
Also, from reading this forum for a while, I know many folks would take the lump sum and invest it rather than plow it into the mortgage, with the goal of making more money with the investments than the interest being paid on the mortgage. (I don't know the exact rate on the refinanced mortgage but I think it's pretty low, historically speaking.)
However, putting the proceeds from my house directly into "our" house seems cleaner and more straightforward to us. Plus it enables the possibility of paying off the mortgage earlier or even refinancing to a 15-year term. (Would that make sense? Is there such a thing as a "cash-in" refinance?) And whether or not to put the money into the mortgage relates to the legal question above, i.e., if I kept the money out and invested it, what rights would I have as far as the house goes if the marriage ends?
So, the questions are kind of entwined and I don't have much knowledge in these areas. Any advice or pointers to resources would be very appreciated! I'm also happy to provide more relevant details. Thanks!