This reader question comes from Rick. He's asking for the readers' advice on this common dilemma that many divorced people face.
My wife and I had a pretty good handle on our finances and were on track for meeting all of our major financial and life goals…college for the kids and retirement for us. We are both 43 and have two kids, ages 10 and 8. My wife went through a mid-life crisis last year and told me she wanted a divorce. I didn't see it coming. We have been divorced for four months. We had it in the decree that I could continue living in the house for a few months.
At this point, I am supposed to tell her whether or not I want to buy her out of the house or if we should put the home up for sale together. Zillow says the home is worth $344k; we paid $400k. We have a mortgage principal balance of $260k. Right now, our monthly payments are $1,200. I'm bringing home around $4,500 per month. Property taxes are $5,000 per year. If I were to move into a town home in the area, it would cost around $200k.
Coming out of the divorce, I am not cash heavy. Without the equity in the home, I am probably walking away with about $35k. I'd like the kids to stay in the home to have some stability in their lives. I like that we have a yard for them to play in. We have lived in it for five years. They have friends in the neighborhood. It is overkill in terms of space for a family of three. I have the kids 50 percent of the time. I've been able to live here for the past four months and I'm making it. However, my saving ability for the future has been greatly diminished. Nothing “bad”' has happened since I've been on my own. I haven't had to replace a refrigerator, buy a new car, etc. Should I stay in the home or sell it? What should I consider in making this decision?
So, GRS readers, what should Rick do?
Author: Ellen Cannon
Ellen Cannon was the editorial director of the financial services sites at QuinStreet from 2010-2015. She has covered personal finance for magazines and websites for more than 20 years, including five years as managing editor of Bankrate.com. She lives in South Florida with her kitty and sunshine.
Rick, I say you ask your ex-wife what the best thing for her would be. Go with what she wants. This shows that you still love her and want the best for her and the kids. You never know, this type of attitude may bring the both of you together again… Let go. In this case, doing the right thing financially may be the wrong thing for your ex-wife of 10+ years and your kids. It sounds like from your brief description, you already know the right answer is to keep your wife and kids in the house… Good luck!… Read more »
Divorce happens. I don’t think reconciliation was a part of the request for advice.
Do what’s best for the ex? Why? She either wants to sell the house to him…or sell the house to someone else. She doesn’t want the house either way.
Why are you putting the “wrong” on him? She did the “wrong” thing (or maybe the right, we don’t know this guy’s situation) when she filed for divorce…that cat’s out of the bag and half-way down the block.
I think the wife is living elsewhere? I don’t think it’s a question of him buying her out and kicking her out, but rather choosing to stay in the home she’s already abandoned.
“my saving ability for the future has been greatly diminished” That sentence right there tells you what you should do IMO. At your age (and the fact that you read this website)saving should be a high priority for you (you said you lack cash at the moment, but didn’t say much about retirement). Personally, I wouldn’t want to live in a house with such memories…let alone paying extra to live there. It’s too big, it doesn’t fit your life anymore, and the house is not going to help put your kids through college (or however they further their education), or… Read more »
Yes, I agree with Lmoot’s advice. I did not go through a divorce myself but I did go through a job loss which ultimately caused us to lose a house that was far too big for our family. We found a real fixer upper (5 years later, we are still fixing it up!!), bought it at 50% below market in a good neighborhood and it turned out to be the best financial move we could’ve made. I say to Rick, sell the current house and move on. Even if you don’t buy another house just yet, you can move into… Read more »
I don’t know a lot about divorce, but a couple of things jumped out of this post: 1) Only the mortgage and property taxes were considered. What about the costs of utilities, maintenance, insurance, etc. on the large home? 2) If the reader did buy out the home, would he have enough left to cover emergencies? If the roof suddenly had to be replaced or he was unable to work, it sounds like there would be trouble. 3) He says the house is “overkill” for three people. What about the time it takes to clean it, do yard work, etc.?… Read more »
My concern with taking on a roommate is the kids. He has them half the time, so he would need to be very careful about who he lets live in the home.
You need to be careful about who you let live in your house, regardless of whether you have kids or not. That doesn’t mean nobody should ever live with roommates.
Both families I know who did it had three kids. That’s why they opened their home to exchange students or upper year college students or graduate students. They weren’t renting to random strangers from Craiglist – they were working with organizations. A friend of mine lived with a family that had two kids when she was in teacher’s college too.
I know this option isn’t for everyone, but I thought I’d throw it out there just in case.
I divorced several years ago. The stability of a house is greatly overrated, in my opinion. Ex husband kept the house; I moved into a tiny cheap but cozy place. The kids had new adventures and we had money to do them. And time as well. Maintaining a large home takes a great deal of time and energy. My kids are happier when I hang out with them instead of cleaning the house or mowing the lawn. I am planning to buy a house in the near future but it will be small and simple, certainly under 1000 square feet… Read more »
I agree with this x10000. My ex-husband kept our big, expensive house and I walked away with nothing, since I only found out after meeting with attorneys that he had never put a dime into 401k and had racked up $35,000 in debt. (Oh wait, I walked away with *something* – half of that nasty revolving debt AND with only half of MY 401k savings, since he took the other half. But I digress.) Anyway he has kept the big, expensive house near school and friends while I am in a nasty little apartment 10 minutes away, regrouping and saving… Read more »
Rick Either way, you will have to get an appraisal, perhaps 2 for the home that you’ve already lost equity in (paying $400, 000 and you estimate that it’s dropped to $344,000). Regardless, you are legally bound to pay off your now X, 1/2 of the equity that is in the home. You are cash poor, post divorce. Would you even qualify to refinance to pull the 1/2 owed to your X? Assume it’s $35,000, based on your income, can you qualify for a $260,000 plus $35,000 0r $295,000 mortgage? if you CAN qualify, what would the monthly payment be?… Read more »
First of all, I wouldn’t necessarily believe Zillow for the value of your home. Ours is off by about $20K, and apparently based on our equally “off” tax assessment value. Get a trusted realtor to do an estimate for you based on what other similar homes in your area have sold for recently. Beyond that, it sounds like buying out your ex would squeeze you financially and compromise your saving goals/needs for the future.
I agree. I am a RE Broker and Zillow is filled with errors. Find a good Realtor in your area (You can look up many qualified, well trained professionals on the CRS website. CRS is a Certified Residential Specialist. You have to be in business for a period of time, have closed a substantial number of transactions AND take about 80 additional hours of training.) This is the time to use a professional, not a friend or relative who happens to have a license. I too am divorced. My ex husband stayed in the house. It is challenging (we have… Read more »
Ditto to the above. Given the circumstances it sounds like it’s best to sell the house. You need the flexibility.
Plenty of kids whose parents aren’t getting divorced move houses. The stress of moving is going to be a one-time stress, whereas the stress of dad not having enough money could be repeated. You could even rent for a while while considering your options– you don’t have to buy a townhouse right away.
Selling also provides a better idea of market value of the house than buying her out would.
If you can swing it, I’d say keep the house. Sacrifice other discretionary spending to keep some stability for your kids. If you can not afford it at all, which I don’t suspect is the case since you’re considering keeping the house, then yeah, move on.Forget blaming your wife for divorcing you and forcing this choice though. A marriage can’t exist if both people don’t want to be in it. It sounds like you are still blaming her, which won’t help your family in the long run.
I think kids are remarkably resilient. I understand not wanting to leave the house in the first year after the divorce, but I think you should plan on selling after that. Financial stress would be worse for the kids than moving house, and it sounds like keeping the house is going to add lots of stress for you. Five years after the divorce (which she initiated), my sister still lives in the house and has primary custody. He owns it and she is living there rent free and with no job. He pays all the bills. Don’t ask me how… Read more »
Sell the house. That is the advice most women get, and most of the time the women get the house in the divorce. Stretching to keep the house for the kids makes no sense when its going to negatively impact your finances.
That sucks, sorry to hear about your situation. Why sell the house? Is there a way to keep it anyhow? I don’t know if your finances allow you but why not use it as a rental property? Seems like the taxes and mortgage are low enough that if you found a family to rent out a house you could use that to gain some passive income.
ALL of the above commenters have indicated that you should sell, and that you are letting a tough emotional decision negatively influence the correct financial one. I add my voice to the growing number. Reasons to sell: 1 – It is inappropriate (“It is overkill in terms of space”). 2 – You cannot afford it (“my saving ability for the future has been greatly diminished”). Reasons to keep: 1 – The kids like it. 2 – … Kids like having happy parents, having time to spend with them, and not worrying about food. Make the right call. PS – You… Read more »
I would sell the house. Financial stability is at least as important for you children as living in the home they have always lived in, probably more. Their lives are already going through many other changes; one more will not be more than they can handle. Having a stressed-out dad who is always broke would have a worse effect on them. Kids are very adaptable and if you present it as a change you WANT to make rather than HAVE to make, they will actually probably be quite excited about it. Make it an adventure for them.
You’re paying $1,200 a month on a 400K loan? How does that work? Or is that your half? What is your salary? You don’t say what part of the country you are in, but I think that’s critical information as to whether you should keep or sell. Housing markets are very local, and you could possibly appreciate or tread water. Looks like you have already taken the bigger part of the haircut (+10%). Given the kids ages, it would be a lot easier to move them in a couple of years when they are in middle school or better yet,… Read more »
Larry,
sorry but you are sooooooooooooo wrong about it being easier to move kids when they’re in middle or high school. it absolutely is not! been there, done that – on both sides of the equation and it is much easier to move them while they’re young(er)
First let me say how sorry I am to hear of your unexpected divorce. I think it’s great that you’re considering what’s best for your kids – divorce always affects kids more than many people are willing to acknowledge. However, their lives (and their family life) going forward will be very different no matter where you live. Christmas won’t be the same and neither will their birthdays, family dinners, and whatever other family traditions you had. If you move now, you will give them one big (likely traumatic) cut. If you stay in the house it will be a thousand… Read more »
This article hits close to home for me. I have been divorced 2.5 years and kept the house that we bought. I have my kid 50% of the time and the house is too big for the 2 of us. Also the maintenance can be overwhelming. And I feel like I pay a lot compared to my take home. Despite all that I am still living in the house. There is a sentimental value knowing that my kid was born in that house. And a stability aspect for her. Also when I run the number and look at townhomes I… Read more »
I went through the exact same thing about 16 years ago. We had just built a new house 3 years prior and were strapped for cash (one of the issues between us). We were in debt up to our ears and had no choice but to sell the house. I’ve regretted the decision ever since. I wish that there was a way I could have kept it. I would say that part of this depends on the agreement and the buyout clause. I’m assuming that the buyout would be based on current appraisal. Interest rates are still pretty good, but… Read more »
Rick; I divorced in 2004. My ex is still paying me $2300/month on a 15 year note that I hold. He no longer has the large income we shared because the businesses we built together are no longer as productive, due to his lack of interest in them. Our dream home, on the lake, is too large and expensive for him to afford. It has also devalued and is not easily salable in the current housing market. My kids and I moved out-of-state the month after my divorce was final. There were many rough spots we had to get through… Read more »
Sorry for your situation. But this is a great life lesson for all. And it could be an adventure. My folks split. Mom got the house. We did fine, and it was an important stability factor. But it wasn’t a McMansion as you describe. Middle-class house, middle-class neighborhood, good schools, close to work. Get cheaper, get smaller, get on with your life. Don’t chain yourself or those kids to a mortgage! And this will help de-tangle you from Ms. Mid-Life Crisis! You need to show those kids that family is not property and doing the right thing is not always… Read more »
Rick, I sympathize with your situation. Divorce is an unhappy time, but when it’s unexpected it hurts even more. You have a lot of thoughtful and caring advice above. To it I would add: if you stay in the house, you are teaching your kids to live beyond their means, rather than to make a fresh start when life throws a curve ball. The wrong life lesson! I would look for a house of the right size that I could afford, but try to find one where your kids can attend the same schools. But if the schools have to… Read more »
I’ve never been married, and don’t have children. I can only imagine how difficult your current situation must be. I’ve always heard the worst decision most women make during a divorce is to keep the house. I’m guessing it would be the same in your case. It’s an emotional decision, to try to keep things the same for the kids. But things aren’t the same, and keeping the house won’t soften the blow. I agree that kids are resilient, and will adjust to the change. Especially since it sounds like selling the house will help ease things financially. Having something… Read more »
After I divorced I stayed in the house for about a year, then sold it and moved to a rental just around the block (same school, same neighborhood friends, much smaller payment). I intended to stay for 2-3 years but I ended up finding a great deal on a home 3 miles away after 8 months. It was nice to give myself a year and not be rushed into selling. I feel like it gave my kids time to get used to the divorce before we made another big change. It was nice to rent for a little while and… Read more »
I would sell the house. Yes, it will put things in upheaval in the short term, but they already are – divorce is what it is. Kids are ultimately resilient with parents who are engaging in the best interests and it sounds like you are. Financial stability and finding the best long term fit will set you and them up for the best outcomes. Staying somewhere you feel strapped and stressed won’t help create stability in your kid’s new world of separated parents.
We divorced 3 yrs ago, I live in the house with the kids. Hubby and I both want the kids to grow up there. It is more than the house, it is the neighborhood and the life long relationships they have with a great neighborhood. It is knowing I can go to work and they can be alone in a decent neighborhood (they are 11 and 13). Hubby and I put in the divorce agreement that I maintain the house and pay the mortgage and when the kids are both out of the house and going to college we will… Read more »
I think your comments about it being too much to manage on your own are what you should really think about. Are your kids going to love coming to spend time with you if every time they do they need to mow the lawn, pull some weeds, or take care of other maintenance tasks that are expensive to outsource but too much for you to do as one man? And you never know… physical distance between your former marital house might prove really healing in putting more emotional distance between you and your ex-wife, and help you move on in… Read more »
I don’t have any kids and I have not gone through a divorce, but my partner has. He had a similar case of mid-life crisis from his ex’s side, only he didn’t have a choice whether to sell up or not – it would’ve been a financial suicide to stay in the house. My partner has three kids who were relatively young when all this happened. From time to time he sits down with the kids and they share memories from the house. Some of these are clearly painful to my partner but very important for the kids, so he… Read more »
Though I don’t have children I am divorced (11 years now) and part of my healing process was moving OUT of the home we shared. My situation is a bit different aside from the not having kids; it was a home of extreme dysfunction and abuse and my healing process began when I left the physical space. I think for you, selling would not only be good for your finances but it will help start a new life for yourself so you can continue to be an emotionally and financially stable parent for your children. 43 is not even close… Read more »
As a financial planner who works with a lot of divorced and divorcing people, my usual advice (and I wrote a blog post on it) is, if you hate your spouse, give him/her the house. Why? A house is, these days, more like a use asset–not very much, if any, appreciation and a continual expense. The prudent rule of thumb is that mortgage+taxes+insurance should be no more than 28% of your gross. But don’t forget routine repairs and maintenance–another 1% minimum of the house’s value each year. No, you won’t spend that every year, but then you get hit with… Read more »
No divorce but I moved house A LOT as a kid, including as a teenager. I didn’t enjoy it but I survived. In addition, I think it left me better prepared to go away to college and better prepared for all the moving around I had to do early in my working life. Many of my friends were overwhelmed by school/work in a new city; they gave up and went home, where I had the confidence and skills to stick it out. I get that ‘stability’ is valuable to kids, but I don’t think it has anything to do with… Read more »
Hmm, this is a tough one and I think it depends on your long term goals. Do you really want to be stuck with the house long term?
Surely it would make a lot more sense to buy out your wife then put you both through the stress of selling the house??
Just my opinion
Without knowing your exact living situation, it’s a bit hard to make the call – inner city? Suburb? Near shops and public transit, or in the boonies? Do the neighborhood kids get together and play outside, or is everyone off doing their own activity? If the call is to stay in the same neighborhood but whether or not to keep the house, I agree with others to absolutely sell the house and get a townhouse. If the problem is that you’d have to leave a desirable neighborhood and find something that doesn’t meet your needs as well, that’s another matter… Read more »
I guess it just depends on what she’s going to charge for it.
Half the Zillow rate? Half of what a few realtors say? Half the $260k?
If it’s not cost effective, get out of it. Kids are WAY more resilient than we give them credit for.
Plus, if you stay in the house to keep things the same, but many other things aren’t the same, that just could be more confusing for the kids.
Fresh start, new location, new rules, new expectations have new possibilities.
Gary “buying an ex-spouse” typically means buying his/her equity in the house. Assume that the house is worth $350,000. Subtract the mortgage balance due: $260,000, the equity therefor left in the home is the difference between these 2 figures or $90,000. Rick would owe his ex-wife half of that or $45,000. The issue for Rick, since he is cash poor post divorce (typical), is that he’d have to refinance for at least the $260,000 due plus the additional buy out of $45,000. Few lenders will do a second mortgage, and Rick’s salary prospects have changed somewhat I believe, since he… Read more »
That all makes sense to me. But you’re guessing as to the value. I was asking. He told us his cash at hand but not what it was going to cost him, you estimated $350k but if it’s only $275k it’s a completely different story. My point in bringing up several different ways was without a dollar amount you can’t really make a recommendation and we don’t have enough info for that.
My opinion is that if it’s not a bargain, get out and do something different and affordable.
Let me give you an opinion from your kids’ possible perspective. My parents divorced less than 2 years ago and my mom didn’t take any settlement in exchange for the house. It is underwater and she had no financial way of taking care of it. We moved in to help her which I understand is not what your kids would do but I can agree with the other individuals who said your kids just want your time and happiness. I would have preferred that my mom got on her feet financially and wasn’t so focused on keeping the house because… Read more »
I think he should attain an additional income stream, such as a part time job; and keep the house.
I think this is an awful idea, if he needs that additional income to support the house it defeats the idea of doing it for the kids cause he would never be there. Its even a worse idea financially, if he loses either job he’d be screwed, if the housing market got soft and he needed to sell it he’d be screwed, and he hasn’t even mentioned his retirement numbers, but if they aren’t up to par, he will be screwed. Being as this is a financial blog, the proper financial advise is to sell it, rent out for a… Read more »
I’ve been divorced. If the house is too much (and it sounds like it is – too much space, too much payment, maybe too many memories) then you probably need to let it go. The kids will be fine. Many divorced parents have this anxiety – but keeping one thing constant (their address) will not “make up for” the other changes which have happened to them.
Sounds like you bought your house at the top of the market, but have paid down enough of the mortgage so you have equity. That’s a very good thing. $1200/mo doesn’t sound like a lot for monthly payments, but with a house, the utilities MAY be higher than a smaller townhouse, and there are maintenance issues that may come up. Since you were smart enough before to keep ahead financially, you need to 1st run the numbers. After all, this is a numbers game. There are expenses associated with moving to a new place as well. Make a budget of… Read more »
I agree with some of the other readers in that I’m not sure I would want to live in a house that holds so many memories. Although it also holds some sentimental value for your kids. That’s a tough decision. From your numbers it looks like you can afford the home, but I’m not sure what the other home expenses are costing you and whether that would squeeze you too much, financially. I think being financially stable is a big part of having a stable home life. And while you might not have to replace anything yet, other expenses will… Read more »
sorry for your situation. As a product of divorce, I only know it from the kids perspective. I do know that my mom got “bought” out of the divorce by getting her equal share of total assets by getting a crap ton of my dad’s retirement. Probably the best decision my mom ever made.
uhhh…. American Express is not responsible for the opinions….whaaa? How did AMEX get into the mix? Oh well. On this subject: Dear Ex-DH did not buy me out, but he did assume the remaining $200,000 of debt on the house. This was part of the three-quarters of a million dollars of debt we were in (unknown to me until the very end) at the time I ran away to the backcountry of Alaska. At the time, it sure looked like XDH was getting the short end of the stick, even though my financial adviser at the time (another ex-wife of… Read more »
Funny, if you were married when the debts were assumed, if you (and his Mom) borrowed money to keep him (not you as well?) out of bankruptcy, you need to own it. If you decided to leave without pursuing compensation from your husband, again your decision. It even sounded like you had at least one person say you were not being prudent following this path, because a lawyer could have argued to seperate debt you weren’t aware of. As far as the 170K house, I am assuming you both lived there and housing is part of all living expenses, just… Read more »
Rick, My parents divorced when I was 11. My mom got the house, and we stayed in the house for a couple of years. My mom then chose to move us to a different home. At first I was upset about this decision, but looking back, I know moving was key to the healing process after divorce. We all needed to move on and accept that a new life was ahead. In the old house it was too easy to hang on to the old life and hope that it could return. I should mention that the new house we… Read more »
I feel like I could write a book about this subject as a child of divorced parents. My mother got a divorce settlement and also got to keep the house, which had a 225K mortage with about 30K left on the mortgage. The reason she got it (kids were out of the house) was so she could sell it and have a nest egg. About the time she divorced, she was getting offers sight unseen to purchase for 250K or 300K, which she refused. Her kids kept begging her to sell the house, the taxes alone were 7K a year.… Read more »
1. KEEP THE HOUSE!!!! 2. Talk to a REALTOR. I’m a REALTOR, and I’d recommend you call a REALTOR to get better values for your house. Yes, market crashed, but in my market, home prices are nearly 100% recovered. 3. KEEP THE HOUSE. You only owe $260K on a $340K or more home. You’ve got 80% equity! You like the house. You can afford the house. Your kids like the house. No reason to sell the house. 4. Make your ex-wife an offer. Tell your ex-wife that you’d be willing to take the house for $340,000 minus $23,000 in closing… Read more »
Um, he’s got $80,000 in equity (to be divided with wife). That’s 23.5% equity total, not 80%
Start fresh…sell the home.
Kids are happy in a safe, secure, loving environment whether it be an apartment or a home. They will not be happy in a home when a parent is stressed or feels anxiety over making ends meet.
I grew up poor after my parents divorced and my father died within a few months. Stress is not worth it.
Rick, I am so sorry. Divorce sucks – plan & simple. Waaaaaaaaaaaaaaaaaaaayyyyyyyyyyyyyyyyyyyyy too much pain involved in that. However, I am glad that you’re reaching out to others for objective input. Here’s mine – sell the house. Move someplace with a good school district. Your kids will adjust and survive (not that there won’t be a lot tears in between), but you’ve got to look at the larger picture. Move to a place you can afford. Don’t forget – you’re going to be looking at retirement someday and as much energy you have in your 40’s, you’re going to lose… Read more »
I’m the product of a very similar situation. My parents divorced, and several of my friends are also products of similar divorce situations. Kids come through it better if everything is pretty open and honest in my experience, and that parents take care of themsleves. A less stressed parent is a better parent, and I can’t help but feel that you would likely be less stressed with smaller payments, less to take care of, and more wiggle room in your budget. Heck, maybe you could even afford to take your kids on a crazy weekend adventure celebrating your new family… Read more »
my vote would be to sell the house and rent a smaller apartment. try that for a year, stash as much cash as possible, then figure out if you even want to buy.
the stability your kids need is in your love and presence–not a building.
i say this as a kid of a nasty divorce. they building we lived in wasn’t a home because it wasn’t filled with love.
As a child of a divorce, I think keeping the house would be really huge for your kids.
My suggestion would be for you to do a very honest assessment of your finances. If you can’t afford to keep it, get out now and move on. If you can, great!
Good luck with everything!
Sell the house. Keep the kids in the school district they are in. Discuss this with your wife. It’s hard enough for kids to go through a divorce. Try to keep the rest of their lives as normal as possible. The only way for both you and your wife to move on is to separate all those finances. You will never want some other guy moving in with your wife in your home…and that could happen. Love your kids, make them the most important thing in your life. Stay friendly and cooperative with the X. Your future life could be… Read more »
First and foremost: Contact an experienced Realtor and find out what your home is really worth in the current market. Get good, recent comps. Zillow can be next to useless for this purpose. (I just checked – I sold my home in April for 600k with multiple offers in just three days. Zillow says it’s worth 516k, LOL. I have the money in the bank and the new buyers could turn it now for a small profit, based on neighborhood comps since their purchase. Next, figure the cost of selling your house and buying another, probably at a higher interest… Read more »