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?
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! I can only imagine how difficult this time has been for you.
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 help you reach retirement goals. You said the house payment is $1200, then the taxes are $5000…does the $1200 payment include insurance and taxes? If not, then you are looking at almost 50% of your income going towards this house.
How much are you willing to pay for sentimental value? I say this is a great opportunity to start over. Go get a house, a small fixer upper which costs waaaayy below your qualification (so you can get those savings back up ASAP) that the kids can help out with to “make their own”. It doesn’t have to be your forever house…just a place to start over, take advantage of the low rates, low prices, sweat equity, and let it be the silver lining in such a low part in your life. One scenario WILL hinder you financially, the other might even help you. Good luck to you.
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 a nice apartment complex with amenities (pool, play area, exercise room, etc) and let the kids get to use said amenities as well as perhaps make some new friends. Kids are very resilient and in my experience, they tend to make the best of new situations. I once made the mistake of thinking that my kids ‘needed’ to live in the best house in the best neighborhood and for a while, that’s what they got. Turned out, they hated the neighborhood, couldn’t wait to leave and couldn’t have cared less whether the house was the ‘best’ or not. Nothing’s perfect!! They just wanted and needed their parents’ time, attention and guidance and it’s up to you to provide that. With the money you save from paying an albatross mortgage, you could even take the kids camping, to the park for picnics, or on day trips to the free/cheap museums. My kids used to love that and still do. Figure out a living arrangement that can help you to save money while still taking care of your children. Best of luck.
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.? How does owning a larger home impact quality of life? I don’t have kids, but I know like having a smaller space because it’s more manageable.
I’m not sure this has to be an either/or situation. I wonder if he’s considered renting out rooms? Even if he isn’t in a college town, local schools often have foreign exchange students in need of accommodations. I know a few people who paid down their mortgages that way.
Just some thoughts. Take them or leave them ;)
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 with only the tiniest of lawns to mow and the tiniest of driveways to shovel. A townhouse might be just the ticket. You and your happiness and your financial stability are keys to the stability in your children’s lives. And when you think of their future, remember it doesn’t just include the next few years until they get out of high school, it also includes trying to help them get through college, and being sure that you are not a health or financial drag on them when you get to your own retirement age. Kids mostly need to know their parents love them and that their parents are happy and fulfilled.
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 for a home. Rattling around in 3000 sq ft for just 2 people seems ludicrous. There’s a $15,000 kitchen that’s used to make frozen pizzas. Taxes are thousands of dollars a year, same with utilities and maintenance.
He kept the house to make a point, and he’s suffering financially because of it — refinancing the house using the cashout from my 401k (SCREAM) so he can get the mortgage payment down to a manageable level.
It doesn’t seem to matter to my son where I live. I think it’s nice that he can still see his old friends, but that’s about where it ends. He plays on sports teams and such that don’t involve his classmates and he really enjoys going on trips and doing other activities that aren’t homebound. So I for one will really cherish the opportunity to simplify and live in a smaller home while still being able to share memorable experiences with him.
One of the biggest mistakes divorced people make is trying to keep up the facade that nothng has changed; to keep up the same standard of living. It’s not possible unless you make a LOT of money or you live in a very inexpensive area.
If you’re even wondering whether you should keep it, you know what to do. Don’t be that guy. JMO.
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? can you afford to pay that new amount? Talk to your bank, do a mortgage estimator to see if you qualify. Check your debt ratio: car loan? credit card debt?etc.
From the outside, it seems like a no go. Additionally, while you are “making it” now, what if you DID need a major repair? You are unable to adequately save now, and the house is full of memories for a closed chapter. It’s too big for your family. This seems to scream-time to sell, pay off X, grab your estimated 1/2 of the equity @ $35,000 and walk away.
Town homes run $200,000-you’d need a 20% down payment or $40,000. Seems like the prudent thing to do, would be to rent in town for at least a year, build up savings, let the dust settle. Talk to your CPA or financial planner. A town home also incurs HOA fees-something else to factor in. Are there rentals in your town? how much do they run?
A move will always mean additional expense: new furniture/decor, home improvement/handyman services, moving costs. Keep that in mind also.
Kids are more resilient than often given credit for. If money is tight, but do-able, there is stress in the home, although under the surface. If downsizing is what needs to happen, let it happen, it’s a fresh chapter in your lives, whether it’ll be in the same town or a more affordable one.
Good luck!
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 four children), but I did make my new place “home” for my girls and I am happier being in a home I can afford and take care of. Best of luck.
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 she managed that settlement. Regardless, I think the house is keeping her down. It’s too big. She doesn’t have ownership of it.
I’m sure there are some divorced parties that thrive in the old homestead, but I think more often than not, someone tries to keep it at his or her own peril. You and your ex-wife bought that house for the four of you. Now that the marriage has ended, it is perfectly fine to transition to a smaller place. If you stay in the same school district and close by, it shouldn’t interrupt their friendships.
Good luck!
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 can probably keep the house if you do something like have a “live in maid/nanny” that goes to college. This would give you the income/time to support it, make it appropriately sized. However, adding a new person to your family (household) at the moment is probably NOT good for the kids.
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, high school.
I lean towards staying in the house until the kids are in a new school. Your payment is low (you’d probably pay the same for a 3BR apt.), and it would be easier on the kids, which is a huge consideration.
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 little cuts that will take place over months and even years as they realize time and again that nothing is the same anymore.
Nothing has been mentioned about schooling – I’m going to assume the kids are either young enough that schools don’t matter or a move wouldn’t involve a change in schools. So, when it comes to your living arrangements, I think you should worry most about your finances as that will make it easier for you to create new memories and traditions for your kids. That doesn’t mean there won’t be a fair amount of suffering for both you and your kids. Life as a single father will be stressful enough. Don’t add to the stress by buying more house than you can comfortably afford.
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 won’t save all that much. Especially since I refinanced the house and the interest rate is 3.5% which is about 1% lower than current 30 year rates. Have you run the number on the townhome? $1200 for your house sounds cheap. A townhome will have HOA fees as well as the possibility of special assessments for paying for roofs and the like.
I totally understand where you are coming from. I cant count the number of times I’m checking Zillow or Trulia looking at houses but I haven’t found a real compelling reason to move since I wouldn’t save that much money and only save some time cleaning. I’ve closed off some rooms so I don’t have to clean those on a regular basis and that helps. I’ve also been trying to simplify my yard so I have less grass to cut.
Good luck on your decision.
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 rising. If you house is worth $350,000 you could get a $280,000 mortgate at 80% equity. This would give you some cash to begin the buy out the $45,000 you’d owe your ex. That would give you a monthly loan amount of around $1400. That leaves around $3100 for the remaining expenses/savings.
You don’t mention if you have car payments/other debts. When I went through my divorce, I was taking home under $4000 and had a $1700 mortgage payment, $200 credit card payment, $200 car payment, $500 Child support payment. I had really screwed up my financial life! If I had kept the house, I would have pretty much used up every penny of my paycheck just to stay afloat.
Run the numbers for yourself and do what’s comfortable. I knew I couldn’t do it.
On the bright side, I met someone about 8 months after my divorce. We’ve been married 14 years now and she’s helped to turn my life around totally. When I first met her, I had a negative equity balance. Today our combined net worth is almost $1 Million.
I still miss my house (I put a lot of blood, sweat & tears into it) but it would have killed me financially to keep it.
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 but they are now fine, happy, productive young adults.
Should my ex default on his house payment, I will get the property back. He is trying to augment his income by using his house for a vacation rental and B & B and I wish him well.
The lesson is to minimize your expenses to a lifestyle you can comfortably afford. I no longer live on the lake but I so much better off now, overall. Financial stability is a large component of personal well-being.
Things change over time. Take great care of yourself and your children. You all are what is truly important.
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 the easy thing, but it is the right thing. :)
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 change, that is something they can adjust to at their ages. It would be more difficult if either were in their teens.
Good luck to you and your family!
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 more affordable should ease your stress level, and your finances, making you more physically and emotionally available for your kids. And that’s what children really need.
But, again, I don’t have children, and have never been in your shoes.
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 not have the stresses of home ownership while I considered my options and made decisions for the next stage. It was also great to save money! I felt emotionally and financially prepared to buy my house when I did. I’ve been in this home for almost four years now. Looking back, I think the transitions were so good for my kids. As others have noted, kids are resilient. Parents who are relatively happy, healthy, and not overly-stressed are far more important to happy, healthy kids than the details of where you live.
So much about my current living situation is a dream come true that I never imagined when I first divorced. Many people were critical of my decision to sell, since my home was much larger and more expensive than the home I rented or the home I eventually bought. They saw it as a downward move for me. What they didn’t see was the crushing second mortgage my ex husband had taken out on the place, and the maintenance and upkeep costs that were more than I could handle. They didn’t see that our new home, while smaller, is so much more comfortable for our family size. It’s right next to my kids’ elementary school, and two blocks from the junior high they’ll be attending soon. It’s so close to my job that I can walk. Those perks have really enhanced our lives, and I couldn’t even have imagined them earlier.
It’s a leap of faith :). It takes courage to pick up after a divorce. Your heart is in the right place. You’ll be fine, and your kids will be, too.
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 sell the house and split the profit. There is more to it – he pays a tremendous sum in child support with the idea that the mortgage is getting paid and he gets his money back basically when we sell.
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 your life a bit easier.
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 encourages them to share them. For example they had a bouncy castle for a birthday party once and like to talk about it.
Whatever you do, the memories of the house you currently live in will stay with your kids and be part of their lives forever. In time you create new ones that will be as important to them as the ones that they already have, regardless of where you live.
You can share the “adult side” of your finances during this difficult time when your kids are older. Hopefully they will gain a valuable lesson on how thoroughly you thought things through and made the best decision for your family.
All the best!
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 to being old – not that you’ve said as much but wanted to put that out there. The man in my life is 53(I’m in my mid 30s) and we both have had the reset button on life pushed over and over again in so many ways for various reasons. How we start from where we left off determines where we end up.
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 a big one–roof, furnace, or the $1,600 I just wrote to have a diseased elm taken down.
It may matter to the kids for a while, but loving families sit down and talk about hard decisions. Generally, in a divorce, the kids are pretty worried about the parents, too, and may well understand the need to sell. By the time they’re in their 20s, they’ll be begging the “old man” to unload the albatross, but by then it will be very late for you to begin savings.
A house beyond what you can afford comfortably is one of the biggest detriments I see in my practice to people having a respectable retirement income.
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 a house.
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 and only you can really decide that.
Put the problem another way: if you had to move for a different reason – not divorce, but say, a good opportunity for growth came up that required a move – would you still want to hang onto the house? Or would you decide the benefits are worth staying? Your question becomes, in the case of a divorce, what are the benefits to moving?
Good luck in whatever you decide. Kudos to you for thinking of your kids. I’m not divorced but I have a kid; he was initially traumatized when we had to move from the only place he’d ever known, but he’s more than gotten over it now and doesn’t miss the old place. Family is more important than property.
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 and his now X bought the home, paying $400,000. The home has lost value since the purchase. His new mortgage would be for $305,000. He may no longer qualify for a mortgage that high, or if he does, this increased monthly debt would choke his budget, which is currently do-able but he has no savings and has been lucky that there have been no major expenses with this now too big for us home.
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 in the end it was for us. In the end none of us want the house because it represents a time in our lives we didn’t really care for. I say make a new future for your kids. Best of luck.
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 bit and build up his cash reserves. Him asking sounds like he has as much an emotional attachment to the house as his kids, it would be good for him to have a clean break from it as well.
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 current and future expenses over the next five years, for your current house, and a proposed new home. Compare side by side the figures and tally it up. I agree that SOME kids are resilient in the face of divorce, but other kids are not. You have to ask yourself whether your kids can handle such a change, if they are going to have to change schools and make new friends. If even one of your kids has the kind of personality or is starting to exhibit it now, that they are having a hard time adjusting to their new child of post-divorce, then more upheaval may not be in the cards. The expenses associated with therapy, may out weigh savings. Also, is your house in a neighborhood where the market is rebounding from the recession? If so, (and realtors can tell you this) and the house will recover back to $400,000 in 5 years or less, then you need to compare if you can save that difference on your own from your income. If you see that expenses on your current house will be similar or the same as buying a new residence, but your current house will increase in value faster than saving on your own, then keeping it makes financial sense. You can use your home to pull in some other cash, where you might not in a condo, coop or townhome. I rented a garage out for storage (I had a 2 car garage but always parked on the street, so I rented out one side)for years, and made some nice bucks. I gave advice to a friend who was unexpectedly widowed, to rent out rooms to female college students, and a teacher (they only needed for 10 months) which she subsequently did, and helped her pay her expenses and increase her savings (she had been laid off 3 months after her husband passed away) until her house was sold. A family friend rents out a few rooms to someone who uses it as office space during the day Mon thru Fri. They are gone when the kids and adults come home. And still someone else I knew rented a room to an elderly woman, who could not afford an entire apartment on her social security. In addition, she babysat this friends kids after school, and ended up renting/living with this family for over 10 years, and became ”nana”, until she had to eventually move into an assisted living residence. If the house is in an area that is stagnating and will not increase in value, then the numbers may work out to move. If you don’t want to use the house as an income stream resource to supplement your current income, then move. If you were to lose your job tomorrow, and your prospects for getting another one would take a long time, but you could rent the house or rooms out, and still maintain a roof over your and your kids heads, then it might be worth staying for that too. Don’t do this emotionally. Run the numbers. Only you can decide what you can or are willing to do to stay, or to go.
Good Luck.
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 arise, like your children’s education!
That being said, if the townhouse is within your area, and in a safe neighbourhood, it might be worth it to downsize your home and free up some savings for you, and your children’s future.
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 yet another corporate lawyer) assured me that the holder of the short end was moi. After his mom and I borrowed against every liquid penny she and I had to keep him out of bankruptcy, he managed to recover.
The house, for which he and I contracted to pay $170,000, is now worth about 600 grand. We’ve been apart for about 20 years, during about 17 of which he has been married to a woman who makes a pretty good salary; so presumably by now he owns the place outright.
If that’s the case, he came out smelling like the proverbial rose.
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 need to let it go. Sureh e came out OK but it could have just as well turned out very bad for him.
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 moved to was in the same area, which meant I was not forced to change schools or move away from friends. That provided the stability I needed.
I wish you and your kids all the best. This will be a difficult time, but sunnier days lie ahead!
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. When the housing market boomed, people in her culdesack were selling their houses for over 600K. We again begged her to just sell. Instead, she took out a heloc, which she has been living off of. Prices have now deflated, plus as she can barely keep up with the house, it is in disrepair. All I can say is try to look at the house unemotionally, simply as a cash asset that you inherited such as from a dead aunt. What would you do? I ran the number and each taking 42K from the sale and applying that to a 200K townhome, only gives you 200-300 more a month. However it may be more savings depending on if you can sell during an upswing, and the relative difference in property taxes, utilities and or expenses shake out. I would just take your time and sell in the next 1-2 years, when the house is fixed up and when you find a good house/townhome to relocate to. Honestly I would have rather had my mother be less stressed than try to hold onto the house.
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 costs ($340,000*.07 = what you’d pay Realtor and Title fees for). So, your net sales price would be $317,000. You owe $260,000, right? So $317,000 (sales net) minus $260,000 (mortgage) is $57,000 net profit. Divide that by 2 = $28,500.
5. Pay your wife $28,500 and quit claim the house to you.
6. Sorry about the divorce. Hope kids are OK.
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 a lot of that with each passing decade. Best of luck, Bud.
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 dynamic with a move! My mom did this, and it’s one of my best memories, with she and my brother and I going to a new city, staying in a fairly cheap hotel and eating junk food that we were never usually allowed to have, and getting to decide what we wanted to do out of the options. Amazing memory. Moving is hard on kids, but everyone underestimates just how resilient kids are. I’d say, if this move doesn’t make them change schools, it’s a no-brainer.
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 more amazing then you could ever imagine.
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 rate, as well as HOA fees associated with a townhome. The Realtor can help with this.
Once you have a solid estimate of your home’s value and costs to stay or move, then you can consider all the other factors, but this is the place to start. Good luck to you!
If there is any financial strain I would vote to sell it. Your kids are already learning and dealing with the adjustment of divorce, the house isn’t going to offer much comfort. Frankly, as long as they can stay in the same school with the peers they already know it’s probably the last thing on their minds. Friendship attachment is far stronger than anything else when you’re a kid. Maybe if they have friends in the neighborhood of your old house specifically, you and your ex could arrange play dates with those children.
I was in a similar situation a few years ago except that I didn’t have kids and it was my husband who wanted to keep the house. We ended up selling it in the end, and I had to fork over the $12k we were short when it sold (we were slightly underwater and my ex was beyond broke). For me it was worth the $12k.
One issue that complicates this matter is that a divorce judge cannot get a spouse’s name off of a mortgage – the spouse who wants to keep the house must refinance (unless the other spouse thinks it’s okay to keep their name on the mortgage – I refused to take on this responsibility). Keep this in mind, since refinancing could complicate things. In my case my ex was unable to refinance, so we had to sell.
If the house is too big and the payments hinder your ability to save, I would lean towards selling and buying a smaller place. Sure, your kids may miss the yard, but you could use the savings with a smaller place to contribute to their college fund. That would have more impact on their future than the yard would.
I think you should sell the house but maybe wait a year or so. Give the kids time to adjust to the divorce, and then look for a new home together.
I think moving house and adjusting to 50/50 parenting involves too many changes.
I post to note that one of my dear friends is going thru a divorce and she IS keeping the house, but she was paying the bulk of the house expenses before the divorce, paying the mortgage, the taxes, insurance, etc. He was splitting the utilities and helping with upkeep and repairs. She also paid the down payment and paid for a recent renovation.
BROKE!!! That’s where you’ll be. Sell, Sell, Sell. The home is well over a third of your take home pay that is a dangerous place to be on one income. Find a cheap rental and begin rebuilding adequate cash reserves (6-12 months of living expenses). You are one emergency away from a horrible financial situation. Your kids will thank you when you retire on your own dime not theirs.
I’m in a similar but different boat. My wife wants a divorce, she is the primary breadwinner, and I’ve been the stay at home dad. when we bought the house, the loan was only in her name. I think she can stay here with the kids, and have the home, but then what about spousal and child support. That will make her income less.
I am considering suggesting that we sell the house. Some of the estimates I saw will leave us with about a 70-100K profit on the home. That way we can both walk away and start anew.
I think she will make the argument that she can stay in the house with the kids, and afford it by herself.
Im reading alot of good advice on this thread and thought you could shed some light on my situation too. My husband and I have been cohabitating for that last year or so. We sleep in different homes on same property but share the main home for cooking & laundry. He has offered 500k for me to leave assessment is 1.4. Should I take money and run and build new home for 2 teenagers who would love to move away from this toxic environment? No mortgage and no debt!! We split bills 50/50 even though he makes more $$ than I do. I don’t think the offer is fair, but neither is he! Divorce is inevitable.
Hi, I am in a similar situation. I married a man whom I thought was honest, until I woke up 9.5 yrs later and realized he had been stealing out of my purse all along. I brought my home and moved him in thinking he would be an asset, but no, he was just a liability. So many bad memories. I think I will sell m home..yet I was never able to upgrade everything I planned, my house ws built in 1910. I agree with Jim, look at the long run….A new beginning, I am.
When I first started my divorce I told my attorney I would sell the house pay all debt and divide the rest. A few months goes by and I decide to keep the house and pay my ex half of equality. The value of house has since gone up 20,000 dollars. Do i still owe ex half of the value on date of separation or what its worth when we agreed the new agreement. Nothing was signed originally we were still agreeing on other things. I live in California so I know laws vary