Buy her out or sell it?
November 11, 2013 9:27 PM
My wife and I are getting divorced, and I'm trying to figure out what to do with the marital home. We have a lot of equity in the place, but also have a not-insignificant amount of joint debt. Equity is probably between $130-$150k. Around $60k other debt (two cars, small credit card, student loans). Help me consider the pros/cons of buying her out of the house (through a cash-out refi) and selling the place.
Reasons to stay/buy her out: easier, cheaper (no realtor fees), don't "lose" out on what I've already done with the place, familiar for kids, awesome yard that I've invested in - big garden, play structure built for kids, fenced for dog. Great location. Amazing school district.
Cons/reasons to sell and buy a new place for myself: emotions left in staying in marital home basically.
Which is why I'm turning to you, surely there must be some other downsides or things to consider here. Because on the face of it, provided I can cash-out refi for at least half the equity and that half is at least 60k then it seems like a financial no brainer to just do that, give her that $60k, have her pay her half the debt and then move forward. What else should I be considering here
Reasons to stay/buy her out: easier, cheaper (no realtor fees), don't "lose" out on what I've already done with the place, familiar for kids, awesome yard that I've invested in - big garden, play structure built for kids, fenced for dog. Great location. Amazing school district.
Cons/reasons to sell and buy a new place for myself: emotions left in staying in marital home basically.
Which is why I'm turning to you, surely there must be some other downsides or things to consider here. Because on the face of it, provided I can cash-out refi for at least half the equity and that half is at least 60k then it seems like a financial no brainer to just do that, give her that $60k, have her pay her half the debt and then move forward. What else should I be considering here
Can you manage the full mortgage payment plus any monthly child support or spousal support that you might be paying your wife?
posted by metahawk at 9:51 PM on November 11, 2013
posted by metahawk at 9:51 PM on November 11, 2013
Seems to me that if you're buying it out because the kids would be more familiar with it, it would be better to keep the house with whichever person is primarily taking care of the kids.
posted by empath at 9:52 PM on November 11, 2013
posted by empath at 9:52 PM on November 11, 2013
You can clean a place of the emotion and 'bad feeling'. You can change that.
You can't change locations. I'm with Blazecock, change the things you can.
posted by msamye at 10:26 PM on November 11, 2013
You can't change locations. I'm with Blazecock, change the things you can.
posted by msamye at 10:26 PM on November 11, 2013
I'm going to be a downer here.
The first thing you have to do, the very first, is go to your mortgage broker and see if you're going to be able to get the mortgage in your own name. If both of you signed on the dotted line there's every reason to believe that the bank would not transfer it over to you.
You mentioned a refi, but it's far from clear if you mean refinancing the entire debt or simply adding on a line of credit to draw out some of the equity.
If you don't have enough credit to get the bank to agree to let you take over the mortgage, then you might have to sell whether you want to or not. A lot of people, and your soon to be ex might be one of them, don't want to have their credit on the line for the next twenty or so years of the life of the mortgage. If I were her lawyer I'd tell her not to risk it. It could stop her from getting her own mortgage later.
That being said, if the mortgage is already in your name alone, I see little downsides to staying where you are if you love it. You don't sound overly emotionally attached to the place as a way of remembering her and I've seen a lot of people stay in places after divorces and be quite happy in them.
The property and relationship are not one and the same.
posted by bswinburn at 10:48 PM on November 11, 2013
The first thing you have to do, the very first, is go to your mortgage broker and see if you're going to be able to get the mortgage in your own name. If both of you signed on the dotted line there's every reason to believe that the bank would not transfer it over to you.
You mentioned a refi, but it's far from clear if you mean refinancing the entire debt or simply adding on a line of credit to draw out some of the equity.
If you don't have enough credit to get the bank to agree to let you take over the mortgage, then you might have to sell whether you want to or not. A lot of people, and your soon to be ex might be one of them, don't want to have their credit on the line for the next twenty or so years of the life of the mortgage. If I were her lawyer I'd tell her not to risk it. It could stop her from getting her own mortgage later.
That being said, if the mortgage is already in your name alone, I see little downsides to staying where you are if you love it. You don't sound overly emotionally attached to the place as a way of remembering her and I've seen a lot of people stay in places after divorces and be quite happy in them.
The property and relationship are not one and the same.
posted by bswinburn at 10:48 PM on November 11, 2013
If you keep the place, it doesn't mean that you have to stay there forever - you can take some time to sort out where and how best to settle your new life. However, if you give your kids a couple of years to get used to their parents' new lives without making them move/switch schools/disrupting their lives, you'll be making this a whole lot easier on them.
Have you asked them what they would prefer? the decision you make here will have a massive impact on their lives, letting them have some input could really help lessen the psychological impact that your divorce is going to have on them.
posted by 5_13_23_42_69_666 at 11:39 PM on November 11, 2013
Have you asked them what they would prefer? the decision you make here will have a massive impact on their lives, letting them have some input could really help lessen the psychological impact that your divorce is going to have on them.
posted by 5_13_23_42_69_666 at 11:39 PM on November 11, 2013
I was in the same situation as you a few years ago, only I bought my husband out of our common home. I always had in mind it would be a temporary stay because I thought too many emotions would be involved and thought I would be happy to get away, make a “fresh start”. Now it’s been a few years and I like where we are. Two things surprised me, first of all, and most important: the children are so happy to still be in their childhood home. They keep telling me how great that is. They have their room, garden and friends around, even small things we parents tend to forget, like just knowing where everything is. So I can’t stress enough the importance for the children to have this secure, stable factor during a divorce – even if you parents manage to collaborate well. Second of all, emotions were almost non-existent from the day he moved out. After all, emotions had been gone a while, so when I bought him out, it became my house. I also started a few projects in the house; things he did not want to do and that I could now do with my taste and liking. Today, I am so happy I stayed in the house for the children’s sake. They really needed that, and it has always been their true home. My upgrading of the house etc. has also increased the value, so that the day they are older and not so attached to the house, I can move out, knowing I maximized their well-being, and at the same time the value of the house. If you can manage the buy-out, then do it and stay there till you are all doing fine.
Wishing you the very best of luck!
posted by dreamsandhope at 1:27 AM on November 12, 2013
Wishing you the very best of luck!
posted by dreamsandhope at 1:27 AM on November 12, 2013
Have you run the numbers for your budget? Unless you're currently under a stupid-high interest rate, your new mortgage payment will be higher than your current one and you'll be paying all of it, plus all the utilities and other house-related expenses, plus servicing half the debt etc. etc. If you're the primary breadwinner and you're already paying for most of that then you will almost certainly also be paying at least some spousal support and child support even if you split custody. Bottom line is that it is always more expensive to support 2 households for the same number of people than 1 household, and that money is going to be coming out of someone's pockets. If your pockets are deep enough that you can swing it, more power to you, mate.
Another minor point of discussion: will your wife's post-divorce finances allow her to live nearby?
posted by drlith at 3:12 AM on November 12, 2013
Another minor point of discussion: will your wife's post-divorce finances allow her to live nearby?
posted by drlith at 3:12 AM on November 12, 2013
I did this. It is no big deal, as long as you and the ex can agree on a mutually acceptable value. After that it is just numbers in the property settlement. The lender will be happy to transfer the mortgage (if it is joint) as part of a property settlement, or with your ex's agreement in any event.
The only caveat on the above is to be sure a) you can afford the new mortgage, and b) that you understand the long term implications of child support payments. In my case I was marginal on the mortgage, and the escalation in child support over time nearly killed me financially. However I survived (just), and rank it as one of my best decisions ever.
posted by GeeEmm at 3:17 AM on November 12, 2013
The only caveat on the above is to be sure a) you can afford the new mortgage, and b) that you understand the long term implications of child support payments. In my case I was marginal on the mortgage, and the escalation in child support over time nearly killed me financially. However I survived (just), and rank it as one of my best decisions ever.
posted by GeeEmm at 3:17 AM on November 12, 2013
Here's what went wrong in my situation. The value of the property, presumed static, increased greatly during divorce negotiations and made negotiations difficult. Then, a few years later, she sold the place at a profit, making the point of stability, etc. irrelevant.
posted by Obscure Reference at 4:36 AM on November 12, 2013
posted by Obscure Reference at 4:36 AM on November 12, 2013
As a point of data, my mother bought out her second husband (my former stepfather) and kept the home they shared, because I'd started school there and make friends in the neighborhood. It was a stretch and we were house-poor, but I can't tell you the positive impact it had on my life. Not being uprooted during a time when everything else was in upheaval was really helpful to me as a pre-teen, and as I've grown up, I've appreciated her decision all the more.
posted by juniperesque at 5:51 AM on November 12, 2013
posted by juniperesque at 5:51 AM on November 12, 2013
You can keep the house if you can afford it.
That means refinancing the whole thing and transferring the deed to your name only. Then, pay your wife her share of the equity, minus her share of the debts.
If, after all of that, you can afford the mortgage on your own. Stay where you are.
If you will have primary care responsibility for your children, this may make a difference to them. If your children are very young, it might not matter. If your children are in their late teens, it might not matter. If your kids will soon be off to college, then it may make sense to downsize. If you have very small children, they won't really have an attachment to this particular dwelling.
So first, run the numbers, it may not be affordable at any price and you may not have the option of staying. Secondly, really think about the children. What are their ages, with whom will they live?
You can stay in a rental in the same area, so they'll keep school and friends, they'll just have a different place to live.
I'm all about keeping things as simple as possible. But you have to mind your money as well. Having a cash strapped parent in a big house so you can have your old room for weekend visitation makes no sense.
posted by Ruthless Bunny at 6:17 AM on November 12, 2013
That means refinancing the whole thing and transferring the deed to your name only. Then, pay your wife her share of the equity, minus her share of the debts.
If, after all of that, you can afford the mortgage on your own. Stay where you are.
If you will have primary care responsibility for your children, this may make a difference to them. If your children are very young, it might not matter. If your children are in their late teens, it might not matter. If your kids will soon be off to college, then it may make sense to downsize. If you have very small children, they won't really have an attachment to this particular dwelling.
So first, run the numbers, it may not be affordable at any price and you may not have the option of staying. Secondly, really think about the children. What are their ages, with whom will they live?
You can stay in a rental in the same area, so they'll keep school and friends, they'll just have a different place to live.
I'm all about keeping things as simple as possible. But you have to mind your money as well. Having a cash strapped parent in a big house so you can have your old room for weekend visitation makes no sense.
posted by Ruthless Bunny at 6:17 AM on November 12, 2013
Contextualise it as a family home, not a marital home. Keeping a significant source of stability for your kids while everybody's forced into dealing with a transition is non-trivial; if it is financially possible for the primary caregiver to stay in the family home I can't imagine what the disadvantages could be. Agreeing with dreamsandhope here. I have struggled a bit to keep my kid in the house she's always lived in, and every bit of that has been worth it; it is very grounding and a major contributor to her sense of security, which is a pretty critical thing to contribute to in the aftermath of a family breakdown. Sorry you are going through this.
posted by kmennie at 7:28 AM on November 12, 2013
posted by kmennie at 7:28 AM on November 12, 2013
Having a cash strapped parent in a big house so you can have your old room for weekend visitation makes no sense.
I have to disagree. My children were 6 to 15, and it was a big deal for them - they still (20+ years later) look at that place and say they would like to be back there.
My (children's) experience suggests that you do it if it is financially viable, regardless of whether it is weekends or full time.
posted by GeeEmm at 12:35 PM on November 12, 2013
I have to disagree. My children were 6 to 15, and it was a big deal for them - they still (20+ years later) look at that place and say they would like to be back there.
My (children's) experience suggests that you do it if it is financially viable, regardless of whether it is weekends or full time.
posted by GeeEmm at 12:35 PM on November 12, 2013
More Pros - potential additional savings on mortgage refinancing penalties (depending on your mortgage and whether you can time the refinancing to a no-penalty date), not having to find a rental/other home to purchase which meets all of your needs which may be tricky in your region (because of kids, pets), less exposure to 'fire sale' buyers making low offers (houses sold during divorce, if this is somehow revealed to the purchaser, as far as I know can attract lower offers than you just selling in your sweet time later).
More Cons - assuming the increased mortgage and associated housing costs you will pay alone tie up more income, will you still be able to save for retirement and other long term things, or will your house pretty much be your major asset? And if it is going to be your major asset, are there going to be any consequences you are not yet aware of when you go to sell it (e.g. are you going to get hit with a capital gains tax at some point that you are not factoring in), and have you considered the implications of drawing down on that kind of asset at various points (such as paying for post-secondary ed or if you were to lose employment or have health problems).
Basically, it is hard to identify your downsides without knowing the whole picture but please see someone for specific advice, particularly as you will no longer have a second income to rely on as backup in case of emergency.
posted by skermunkil at 1:53 PM on November 12, 2013
More Cons - assuming the increased mortgage and associated housing costs you will pay alone tie up more income, will you still be able to save for retirement and other long term things, or will your house pretty much be your major asset? And if it is going to be your major asset, are there going to be any consequences you are not yet aware of when you go to sell it (e.g. are you going to get hit with a capital gains tax at some point that you are not factoring in), and have you considered the implications of drawing down on that kind of asset at various points (such as paying for post-secondary ed or if you were to lose employment or have health problems).
Basically, it is hard to identify your downsides without knowing the whole picture but please see someone for specific advice, particularly as you will no longer have a second income to rely on as backup in case of emergency.
posted by skermunkil at 1:53 PM on November 12, 2013
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An excellent reason to stay where you are, if only for your kids' sake. If you sell the house you'll also pull the kids away from their friends and social life, which is stressful for them. If I took on the responsibilities of raising children I'd do everything I could to check my personal baggage at the door and put their needs above all else.
posted by Blazecock Pileon at 9:37 PM on November 11, 2013