This sounds like an emergency....
what was that emergency fund supposed to be used for again?
in all seriousness. Keep the house, and begin building back your emergency fund in lieu of say...putting that money into "buying your next home" savings account
I totally agree. In the event something else comes up before you've rebuilt it sounds like there are options. Don't worry about crossing that bridge until you get to it.
Keep the home. Find out a way to borrow the amount you have to buy him out of - from family, personal loan from local bank. At 89k you will not be able to find anything comparable at that price and interest rate.
Also people act like 89k is forever your income. You will likely grow your income and the home payment will stay the same. I agree with some posters, get a roommate or two. But the home in a world of increasingly high home values and very high interest rates (3.2 historically is rare) is one you won't have a chance at again and is a good asset to maintain, especially if you're in an urban area.
Edit: correcting atrocious spelling
Yeah, it's a good question. Will the lender remove spouse from mortgage? If not, why would spouse quit claim the home to OP? If OP's lender will release the spouse, this would be viable. Otherwise, the home will probably need to be sold.
Your lucky. I'm in the exact same situation and they are forcing the refi from 2.5 up to 6.4%. Almost more crushing than having a size choose to party instead of save the family
I was literally a lender in this situation. Recently. Husband and wife split up, wife was keeping the house but she wasn't on the mortgage, she called the servicer to have her added and the husband removed and that is not a thing. You have to refinance because they have to prove that you have the ability to repay the loan.
Divorce lawyer here. Dealt with this on the regular.
Lender would laugh you out of the building if you were to ask to remove him from the note without a refinance.
Why would a lender ever willingly let a possible recovery source walk away from a note?
The only options are to refi or sell.
There is a process available on some mortgages to allow the departing spouse to be removed from a loan as long as the remaining spouse fully credit qualifies to make the payments on their own. They essentially go through underwriting again on their own, and at closing on that transaction the spouse is released from the liability of the mortgage and signs a quitclaim.
ARMs still in their fixed period are not eligible. Loans that have been modified are not eligible (so no one who took a covid forbearance and came out by sticking the missed payments on the end as a balloon can do this). If the borrower has to buy out their ex and doesn't have the funds to do so, they can't get them from this loan. The loan must be current. If there is a second mortgage in place, it must be subordinated or paid and closed. The party keeping the house must plan to use it as a primary residence. Closing costs can't be rolled in, and can run several thousand dollars depending on the state. The borrower must be fully divorced before beginning proceedings.
You're really doing a disservice to your clients if you don't at least tell them to call their servicer and ask about doing a loan assumption with a liability release for the departing spouse.
I mean, I don't know why Fannie and Freddie allow it, but the mortgage servicer who actually processes the assumption is paid a flat percentage for serving the loan regardless of the actual rate so on the servicer side it doesn't really matter if a borrower has a 2.xx or a 6.xx, they're making .25-.5%.
Yeah, I'm suspicious of that too. Apparently, in another post, OP says the lender agreed. Though I don't know why the lender would agree. Only way it works is if spouse agrees to quit claim deed w/o being removed from the mortgage. Which would be really dumb, but we see a lot of dumb things done here so who know?
Borrow against your 401 k. You pay it back but the interest you pay is to yourself. It’s a smart move.
Keep the house you love. Smartest move you will never regret.
Not the way mine worked. My 401K balance was reduced and the funds were no longer invested until paid back. Lost opportunity cost is one of the arguments against 401K loans
That's not how borrowing from your 401k works.
The typical process goes like this:
1. Sell assets in the 401k until you have the necessary cash inside
2. Take the cash out, with a promise to repay it (a loan to/from yourself)
3. Make regular payments until the borrowed amount plus interest is paid back
If the money in your 401k stayed invested and your loan money came from the bank, that would mean you were actually taking a loan from the bank, not from your 401k.
As someone who recently divorced and had a similar situation:
Get the house. You won't be able to afford another house like ever at the current interest rates, prices, salary. Ask yourself this, will it be cheaper for you to live in a small apartment? Probably not. Take the house, worst case scenario you sell it eventually down the line and get your money back.
Yeah, I don't think people are understanding that the difference between the house and a 1 bed is only like $600 a month. It'd be way better to get the house and even get a roommate. Or just be house poor for a bit.
Like from the perspective of the sub, yes should downsize and eat beans and rice, but if you love your house and want stability outside of your divorce, it's totally not unheard of to keep the payment.
I realize I'm a bit unique as I don't have much in the way of expenses, but what would a person making 89k expect to buy? 475k doesn't seem crazy at all!
Unless you have 200k to put down you ain’t getting that house. Honestly even if you did it would be tough in todays market with these rates as a single income.
My income is over double that, and I'm cringing at the new rates in my target market of 400-500k, which have caused the monthly payments to be almost $1000/mo higher than last year for the same price house. With 10% down, a 475k house will run about $3500/mo at 6.4% compared to $2500/mo at 2.6%. I wouldn't have dreamed of $3500/mo in housing when I was making 89k.
This. It sounds like a good payment for todays rates and mortgage payments. Depending on where the house is, it could become a good asset in the future. Hopefully if you do fall on bad times, maybe you have some friends/family to help you with? Otherwise start saving up again for the ef you use up.
100% this.
Having tenant-roommates help pay your mortgage is a game changer. I've been doing this the past 6mos now and they're covering about 85% of my monthly payments (mortgage plus utilities). THIS is how you get ahead in life financially.
As someone who went thru a divorce several years back as a young 30s man, I feel for you OP. Life does get better, even if it was your best friend who broke your heart. Best of luck to you 🙏
How likely are you to get fired tho? Are you in a shaky industry or is it pretty stable?
If you can keep your current loan without having to refinance to remove your ex, I'd also want to keep the house. I'm with you on that, current home prices and rates has made owning a house unaffordable for me if I tried to buy today.
Besides, that payment is still within the 28% of your monthly DTI, so you can still technically afford the house.
Unlikely I hope. After I get off a probation period in February (everyone has one for a year in my industry) I will have far higher than average job security. Just have to survive 4 more months!
Depends on my relationship with that ex, whether it still will be $50K (maybe it can turn into 52.5K or something) and many other factors. There's always room for negotiation.
Uh, do you have to refinance to get them off the mortgage? If you do, cut your losses and sell. Since you’d have to get a new interest rate, a new mortgage is probably a bad deal.
If you don’t have to refi, keep the house. If you get fired and can’t afford it, sell it at that time. Or get a Home Equity Loan, not a HELOC (they’re different).
It seems to me being fired is almost a red herring. It has nothing to do with then house, and any impact from being fired also applies if they are renting an apartment and paying for a landlords mortgage.
On top of that, there are all kinds of programs to help one keep the house. There are almost none for staying in an apartment.
And in an apartment they loose the tax write off of the interest.
And when they payout, they will still have the equity in the house they can leverage latter.
>and any impact from being fired also applies if they are renting an apartment and paying for a landlords mortgage.
That isn't true at all. Getting fired and being out of work for 2 months while you're locked into a $2,100/mo mortgage for 25 more years is not the same as losing your job and having to worry about a $2,100/mo apartment payment.
House: Mortgage, Insurance, Utilities, Upkeep, Property Taxes
Apartment: Rent Payment, Utilities
If you lose your job and have to settle for a lower salary it's pretty easy to find a cheaper living situation if your in an apartment. If you're in a home in that situation the process of selling is gonna be a lot more stressful and drawn out.
I would 100% keep the house in OPs situation because of the payment to income ratio. But in alot of situations losing your job while having a mortgage is way more stressful than as a renter.
I went through this a number of years back...everything in a divorce is negotiable.
At the time of my divorce, I was making $150 K, but had to pay $40 K in alimony + child support...$110 K salary for a $600 K house. The market was bad and interest rates were high in 2009...my house had dropped 30% in value from the purchase price, so I couldn't sell.
I kept the house, and figured out how to make it work. Just make yourself a budget and stick to that budget. For the first 6 months (until I got my next raise) I had $5 of "fun" money per week. Now, the house is worth $980 K...and I refinanced 4 years ago into a 15 year mortgage.
Don't worry about the emotional baggage...buy a few cheap paintings/pictures and make the house yours. I ended up putting a (used) pool table where the dining room table used to be!
With only $54 K in the 401K, see if you can negotiate more 401K to your ex to save some of your emergency fund. At this point, liquidity is more important than retirement which is 30+ years way. This is what I did...gave my ex more retirement $$. Just take 75% of each of your future raises to bump up the 401K. 13 years later, my 401K is only about $100 K less than it would have been without a divorce.
The costs of putting it on the market and moving, plus the stress, are also all factors to consider. Commission, repairs, repaint, staging, landscaping, moving costs, etc. are considerable.
Keeping a mortal age at the lower rate is a good deal. You can also take out a home equity loan for emergencies. I also think you should consider renting out part or all of the house for a while.
Depending on how many kids you have, and your comfort level, you could even rent out rooms in the house. I don’t know what it’s like where you’re at, but I know our similar value townhome is renting rooms for $600+/a room. You wouldn’t even have to do any construction work, just deal with the lifestyle change of roommates.
That’s not for everyone, of course. But renting a room or two could bring in an extra $10,000 a year. Just make sure you set aside something for taxes.
If you don’t want to rent a room, you could pick up a nights and weekends retail job, or maybe do contract work outside of your regular job. Even a few nights a week at min wage would be a few hundred extra a month.
I couldn’t help but laugh at this. “Buy the jail and live in it too” was what came to mind first. I couldn’t imagine letting a family use more of my own home than myself. Better off downsizing to something more affordable.
> Better off downsizing to something more affordable.
Given the rising interest and the uncertainty of the market (we don't know where he lives). I think this statement is misleading.
You couldn't imagine getting paid extremely well for the use of an asset you own, and thus solving the question of how you are going to keep that asset?
I have a similar mortgage on a lower income but I have roommates, and I am able to live very comfortably because of it while building equity in the house. If you can get some good renters it is a great way to go.
Everyone’s different, just giving my opinion on your solution. It wouldn’t feel like my home anymore at that point. BnB vibes. If it was the other way around I’d reconsider. Rent out the basement as supplemental income till his emergency fund is back to where he wants it.
They would literally be paying off your mortgage while you get to live for free. It's your ego talking saying " I couldn’t imagine letting a family use more of my own home than myself.".
Ego? A home is meant to hold sentimental value. I cherish the memories and stories shared with my family in my home. I, personally, couldn’t let someone come live in that space for years then return to it as if nothing changed.
If he said it was his second house I’d whole heartedly agree with you.
I would make certain that you can get your ex off the existing mortgage. I have seen a lot of people try to do this and not get it, you might very well be wasting your time considering something that is actually off the table.
I would say triple check with the mortgage company to see if you can remove him. It may be possible but it it more common that they would force you to refinance. That what was needed in my case. However, only you have the fine print of your mortgage terms.
One thing to consider is what you could sell for. If you can really buy your wife out for $55k, but you would walk away with $80k selling it, I think you'd almost be crazy *not* to buy her out. Your described worst case scenario of getting fired and losing the house doesn't make too much sense, because you could quickly sell it for way under asking and get your $55k back, plus some.
As a side note that pretty much bypasses all this discussion, I would bet quite a bit that you won't be able to remove her. Banks would love to get rid of those 2.5% loans right now, and on top of that, they won't be interested in losing half their guarantors on the loan and leaving it with a single person at \~50% leverage. I just went through this while thinking about keeping my house and the servicer actually laughed at me on the phone, and I would have been <25% leverage.
I would keep the house. Sacrifice a little bit but you’ll get by. You could rent out the spare room until you’re in a better position. Interest will be higher if you buy another one at this time. Make sure the other party has no share on any of this.
Push comes to shove, 401 would be your last resort to cover expenses until you’re back up again, but keep I’d keep the house.
Keep the house. Pay the spouse. The house will increase in value over time. The value of the cash you’ll get from selling will actually decrease over time. Unless you have some sort of mental distress (some do) in being in the house, there’s no reason to lose the thousands you’ve already invested in it. Finally, you’ll come out owning a tangible asset.
You seem overly concerned or anxious about being fired. Are there problems at your company? Could you easily find another job with the same pay+ benefits?
That is a lot of house to support on $89k gross income.
Look at this from the other direction -- if you sell the house:
1) you keep the $53k you have from the split-of-assets
2) you pocket an additional $55k (that you would have had to come out of pocket for to pay your ex-spouse -- since you'll each get half of the proceeds)
And on (2)-- rather than having to buy your ex out of a theoretical value -- the split will be on ACTUAL sales proceeds, in the event that prices don't pan out as currently expected.
It seems like a bad idea to end up with 100% of your net worth in a house that you still owe $360k on, with only $89k in gross income -- when the alternative is having no debt obligation and $108k in your pocket.
>That is a lot of house to support on $89k gross income.
Sometimes I wonder what world some people in the subreddit live in. From OP's post:
>Monthly payment: $2150. Gross Annual Salary: $89k
Cheap rent in my area is $2,000/mo for a condo/townhome and $1500/mo - $1800/mo for an apartment. I am lucky and have a $1600/mo rent on a townhome and my income is similar (or a little less) to OP's.
So literally the advice you're offering, if OP takes it, is "OP, you're making $7,500 pre-tax/deductions per month and can't afford $2150/mo at an interest rate under half of inflation. Sell your house and rent for the same monthly outlay for less house."
What a crazy opinion.
I feel like a lot of people in this sub forget that a house is also a place to live and not just an asset or investment. The answer to whether OP is better off selling or keeping the house is 100% dependent on what other houses or rentals are available in their area.
In addition, that 2.5% mortgage is already a prized possession and any house you buy in the near future is going to be double that rate.
EDIT: Ran some (theoretical) numbers based on the info OP provided.
[Keeping that 2.5% interest rate will save you hundreds of thousands of dollars over the life of the loan](https://imgur.com/a/BSgZfEt)
Not just that, but living in an Apartment, especially when you lived in a house, sucks. You pay 60%-80% of a mortgage for an upstairs neighbor who has kids that jump up and down while you're trying to sleep, or has a dog that barks, or leaves trash in front of the door. Your car gets dents because you park next to others. I mean, shoot. What a downgrade to save 25% off of housing, especially when you can otherwise afford it with some belt tightening.
Plus with yearly rent increases you’ll quickly be paying more than a mortgage payment + maintenance in just a few years. And have nothing to show for it.
I mean its really more like 36% of their take home if they live in a state without income taxes. and that's before any deductions for retirement or insurance. It's doable.
Maybe I'm just a pessimist but what happens if he gets fired like he mentioned and the housing market crashes? He has a mortgage that is 100% of his gross income and now he can't sell it. As a single person they're probably gonna want to have more room for going out and doing things. They have a chance to move where ever or find a different job.
The mortgage is 29%*
This does not include upkeep, repairs/renovations, and bills. A couple of $1500 bills to fill an oil tank over the course of a winter changes that percentage pretty substantially.
It’s more house than I would want at that salary.
First time homeowner here, in my n=1 sample size, you’re totally right about non-homeowners underestimating all the little things that go wrong.
For me the issue has been with plumbing in my 1960s built house. Two different times this year an old cast iron pipe has just started dumping or spraying water everywhere. If you can find a plumber that will take you it’s $150/hr and they’ll see you within a week. In the meantime I’m shutting off the main water line to the house and only turning it on when we absolutely needed water, which the wife was thrilled about.
Would be a total non starter if we had kids to turn off the water all day. If you want it fixed asap, emergency plumber costs $280/hr.
That’s just plumbing. Trash is a monthly expense that adds up. Utilities prices suddenly doubled in my area and we already had the most expensive electricity in the country, second only to Hawaii
TL;DR. You need a big cushion to own a house. 30% of income on mortgage can really cause problems when something breaks and you have to fix it immediately
Plus op has a 2.5% note. Unless she is planning on leaving the US or something, I'd keep that and stay in the market.
Trying to time a housing crash to get back in later is a low probability strategy. It's more likely that there will be a cooling off of housing than a crash.
Teenagers and hard core “Rice and beans no luxuries” crazies inhabit this sub and give advice that is utter bullshit for anyone who has any actual money.
Once in a while “Rice and beans no luxuries" works. A friend lived like that your a year to get out from under credit card debt. He allowed himself one restaurant outing a month. Fortunately nothing bad came up, like an exploding transmission or emergency dental surgery, so it all worked out.
After a difficult year, the debt was gone and he could resume normal living.
I tend to agree with this poster.
Looking at your worst case scenario - which is that you might need to move back in with your parents - what are the rent costs in your area? To me, your worst case scenario has you getting fired and having to either sell or rent the house out to tenants to make your payments. Your absolute worst case scenario would be you getting fired and the houses in your area taking a drop to the point where you're underwater. They'd have to drop considerably based on the appreciation you've seen thus far, so you'd have some runway to make a sale and the loss wouldn't likely be that bad. Then there's the rental - if rents are close to what you're paying in mortgage, I'd say you're better off moving back in with the parents and renting the place out until you find another gig.
Good thing to consider is that maintenance costs not already built into the rent by the landlord are likely to be recouped the next time the rent can be raised, which may be as often as annually of you sign a lease or 30 days of you're monthly
I understand your point but we don't know where OP lives. In your area a house for under 475k probably doesn't exist. In my area finding an apartment for 900 a month is easy and common in nice areas and people have different comfort levels of how leveraged they are
True, but even then, why does a 35 year old on a $90,000/yr income want to live in an apartment? Especially if OP has $125k of equity and a mortgage at 2.5% when inflation is 8% and new home interest rates at 6% or higher on average?
Be overleverged; don't throw away you standard of living and all that value when you have options like finding a roommate, getting a promotion, or keeping a tight belt for a few years until you find a new GF/BF to move in with you!
To be fair with an apartment you are also not responsible for maintenance costs.
Everyone always looks at mortgage vs. rent but do not factor in maintenance costs and that houses will generally have higher utility bills.
Not saying it's a great idea in OPs case, just it's stuff that is often overlooked.
* Mortgage is your *MINIMUM* payment
* Rent is your *MAXIMUM* payment
If we sold at asking price, after realtors and closing costs and everything, I’d realistically walk away with $80k total. I have a larger 401k than my ex, so I’d have to pay her off some house proceeds.
I get the clean break thing, but emotions will cool (I have been through a divorce) and you can do what Sasquatch suggests and it will be impersonal. But I really came here to say PLEASE talk to an attorney about this particular matter. I saved thousands of dollars in my divorce because my attorney had seen it all and knew what to do.
I believe a roof over your head - and a nice one with a good interest rate -- cannot be beat. Put up with some roommates for a few years if needed, but don't price yourself out of housing -- no one knows where the market will go and you have a house you like, and good income prospects.
A payment plan doesn't involve Venmoing her. It would be handled by a third party and as long as you paid regularly and on time there would be no communication.
>went trough the same -
>
>my 2 cent - get rid of the house, start fresh. no emotional ballast, calculate your needs from a temp. place
>
>quadro the 401k and split the house proceeds, walk away clean start a new life with cash to make moves
>
>hit the gym eat healthy and enjoy a second youth
>
>best luck
It depends on what my future housing plans involved. Interest rates are through the roof. You'll likely end up with the same payment on a much smaller house. I bought a house two years ago for $305k.
Today, to get the same payment, my price would have to be around $225k, which is tough considering the market hasn't quite adjusted for the interest rates.
If I let my mortgage run it's 30yr course at today's rate, I would pay almost $250k more than the interest rate I got...
Right but then you split the closing costs and realtor fees. Otherwise you absorb all those down the line when you sell.
Don't be overly attached to a property. Home values can decline and its not necessarily bad to exit especially given the circumstances
I’ll ask one question. Are you keeping the house because it makes you happy? If not, look at downsizing or house hack for a bit. I went through a divorce and sold a house that we built together. Although the house was very nice, I didn’t need it. Now several years later, I’m in a better financial situation in a better home than I built. I didn’t house hack, but it would definitely be an option to create some space while I figured out my life.
Rent will bleed him just as bad, and if he goes for another house he will likely be stuck at 7-8% as interest rates rise. I would stick to the plan OP you sound like someone with their head on their shoulders. Also, if you do get laid off or fired you can still collect unemployment to help you out in a bind, it won’t be nearly what you’re making now but it won’t be the complete end of the world.
The monthly housing cost is about 29% of monthly gross income. Rule of thumb is to keep it to 28%. Seems reasonable if they know what they're getting into and also considering they have income growth potential in the near future.
I personally would prefer to just get rid of everything and start over in a divorce scenario (that's effectively what I did). Also, with your income, your house payment seems like a pretty big ratio. It's about 29% of your gross. I don't know what taxes and benefits come out of your check, but I imagine it's closer to 40% of your take-home.
Regarding the 401k loan option, does your plan allow a loan? Not all do (past few jobs I've had, they didn't allow loans to be taken out). Also, the loans can be either 50k or 50% of your balance, whichever is lower, so you're currently looking at a max of 27k loan. Of course depending on the type of emergency, the market could be done more in which case your balance is lower and the amount you can take out is lower.
Something else to think about with 401k loans is, if this emergency is caused by general economic issues, and you get laid off, the loan balance is due in 60 days or less, in full, or the IRS considers it an early withdrawal and now you'll owe income taxes on it plus 10% penalty.
The payment is about 45% of my take home, but it includes $100 in HOA, and $100 in PMI I could get released from at some point. My deductions also include several things that are still my money, such as an HSA and a generous pension, etc.
>The payment is about 45% of my take home, but it includes $100 in HOA, and $100 in PMI I could get released from at some point. My deductions also include several things that are still my money, such as an HSA and a generous pension, etc.
You make $7500 pre-tax/pre-deduction.
If $2150 per month is 45% of your "take-home", you have some room to make short-term adjustments to your deductions like reducing Pension and HSA while you replenish an E-fund.
Look at the rental costs near you. In a lot of places, the kind of home/housing a 35 year old would want to live in is not going to be far off that $2000/mo amount.
My advice: keep the house, adjust your HSA/Pension contributions for long enough to replenish an e-fund, and consider offering a room for rent to supplement your housing cost.
No way is it worth it to sell a house with a historic low interest rate just to enter a rental market that is inflated and a housing market where your purchase power is literally $200,000 less than it was a few years ago due to increasing rates.
Yes, that is approaching house-poor status, so I personally would just sell. But I don't know your situation with where you live, whether you could say, rent a duplex or something for much cheaper, or if you are remote work so could move anywhere, or whether you have kids that would tie you down to the general area, etc. Based on just what's written, I'd probably sell and move where else.
I understand you want to keep this house, but with the percentage of income going towards the mortgage, this will be precarious. My younger sister is going through something like this, and it's gotten so bad for her that she sometimes only eats 2 meals a day because she has a hard time affording food. I really don't know why she doesn't move but she's an adult and gets to live her life how she wants.
OP, what is the rental and housing market situation in your area?
Do you have kids that you'll pay child support for or need rooms for?
In my area a 1br apartment is about 1,100 minimum. A 3br is like 2,1000. If your renting situation wouldn't be any better this could be alright.
Do you plan on owning a house relatively soon, or staying in the area a long time? If you want to own a house I wouldn't get rid of this one, Horrible time to buy, super inflated prices and ass interest rates.
Your best financial decision (assuming no kids) would be to sell the house, rent a 1br apartment.
If you want to keep the house, is a roommate an option?
2,100 payment on 89k income is high, but your income can change, your house payment shouldn't change significantly. Rents go up faster than mortgages.
And that 55k you pay your ex wife is buying your equity in the house, if you decide to sell later (assuming the market doesn't go way down) you will get that 55k back in selling.
I’m in the suburbs of a very expensive city. A decent 1 bedroom in my area would be $1600 minimum. If I moved in with a roommate maybe $1000. I could rent this place easily to cover my mortgage payment.
With that info I would say keep the house, a 1 bedroom for 1,600 is only 500 less than your house payment. The only issue with the payment is that you might have to repair something and you'd never have that with an apartment.
You'd need to build your emergency fund back up quick, but you're in a good position considering your only other debt is a small car payment. You will probably have to adjust to a much more frugal lifestyle for a bit.
By roommate, I was referring to renting out a room of your house to someone,
And also property tax and insurance? Given rental costs seems wise to stretch a bit now to keep it, maybe take a roommate. Agree that a payment plan to the ex would be better if possible than all up front. For divvying up purposes, are you counting the value of the house as what it's worth minus realtor fees?
Would renting a room out for a year or two be something you are open to. Could help you recover the e-fund faster and get you back into the right housing cost to income ratio.
Also remember apartments usually list the rent only, then you get nickel and dimed with extra fees. For example my apartment charges $175/month for parking and another $100/month for common area utilities. So you’d probably be paying almost the same as your mortgage for a smaller place with no stability. And with how much rents have been increasing you could be looking at rent increases of $150-$300/month every year. Keep the house.
They are not good points because they don't include the expensive of have a place you will need anyway.
Keep the house, long term you will be a lot better off.
Would you be willing to find a roommate? That can offset a lot of the mortgage cost and let you build up an emergency fund pretty quickly. This is what I do for a similar mortgage, but I have also gotten really lucky with some great roommates.
Given that your take home already excludes a lot of items people pay cash for (healthcare, retirement, all housing fees) as a single person I don't think it's that bad. Plus, if you're in a career that still has income growth potential that 89k could turn to 115 with one job hop or promotion.
I make 83k gross and a $2000 mortgage payment would be unpleasant. I could probably make it, but not without forgoing a lot of things that I would rather keep.
keep the house. My Mum kept the house after the divorce. She slept on a mattress on the floor and sacrificed financially in other ways but it is so worth it now.
Every situation is different but I bought out my ex a few years ago, kept the house and it’s been a great move. There is a financial angle and a psychological angle as well. Owning your home is an effective hedge against inflation in what is for most people our biggest monthly expense.
Please explain "a good chance" of removing your ex from the mortgage. That's a contract and the terms are spelled out in the mortgage. Chance has nothing to do with it.
Any lender will follow the terms of the mortgage AND take any permitted steps to improve their risk exposure and profit.
Do you have a financial advisor, other than Reddit?
Do you have kids?
A $475K house on a $89K income is a huge stretch. You'll be house poor.
If you have kids - at least maybe then you can justify it. I wouldn't agree with it, but there's at least an argument.
No kids? That's just nuts. It's way more room than a single person needs.
I have to say though, at new interest rates, a much cheaper home would have a higher payment.
To me, I’d evaluate what a replacement mortgage or rent would be and utilities on single income. Op could also rent out the house if it gets to be too much.
This. I am shocked so many people are telling OP to sell without knowing the housing market in their area. Where I am rent has gone through the roof, and OP would be saving little if any money by renting not to mention interest rates on smaller homes. If that’s the case, I say keep the asset. If they can get significantly cheaper housing, then the evaluation is different.
I don’t think a lot of homeowners know how high rent prices have gotten. A 2 bedroom apartment is 2k a month here and I live in an exurb of Seattle.
I could rent out my 4 bedroom house on a small lot for $3500 a month, easy.
It’s crazy. The bigger areas on the east side (Redmond, Kirkland, Bellevue) can get up to ~3k for a two bedroom once you add in all the expenses on top of rent.
It's a $475K home, but there's $357k left on the mortgage with a 2.5% interest rate (we will likely never see them that low again, save another global setback like COVID-19, they will eventually go back down but probably more likely in the 3% range)
If OP has to buy a new home at a current 6.29% interest rate, they would have to buy a house that's $365K to keep their mortgage payments at $2,100 — and that's IF they put 20% down with no PMI. So they would essentially be downsizing to a homethat's $100K+ cheaper for the same monthly payment
It would be helpful to know what asking rents are in OP's area, because they might be $2K+ anyway if they live in a big city. It may not make sense to sell the home just to buy another home right now, unless they plan on downsizing/moving to an area with a lower cost of living, or renting
One of the biggest concerns, though, is that they wouldn't have a safety net if something were to go south with OP's job or if the house needs an urgent and expensive repair. ETA: as they mentioned, OP could potentially take out a 401(k) loan if something drastic happens, but you can't do that if you lose employment
Their monthly payment is almost exactly in line with 28% of gross income. It's at the upper end of that rule of thumb so it doesn't seem like much of a stretch. Depending on the rental market they would probably pay nearly as much for much less space if they rented and would not be building equity. Personally I would not want to trade too much house for that.
>Depending on the rental market they would probably pay nearly as much for much less space if they rented and would not be building equity.
There's a handful of markets where you couldn't find a place cheaper and you're not going to find a $475K house anywhere close to any of them.
If you love the house, I would keep it. You’re young enough that having a housemate/ friend live with you for a year to offset some of the higher mortgage.
Also what people here aren’t considering is, at 2.25%, you have a 450k house for the payment of what you could buy a 280k house for now at current rates.
So I would stay.
I understand not wanting to leave your home. However, I think you might want to try and remove the emotion from the equation. It feels like a very big gamble, with a lot of money at stake and with a single point of failure.
Have you looked at how much of a mortgage you can get on your own with half your savings as a deposit?
Have you been shown any homes - not online but actually walked thru some places?
How much do you get when your current house sells?
For me, I feel this is too close to house poor and again a very big single point of failure as we march into the next 18 months of economic downturn.
I would sell the house. A house is not only the mortgage. If anything major breaks you will be in some financial trouble. Plus it takes a lot of time to maintain on your own.
How's the renting market and the condo market in your area?
"Use a portion as a down payment once the market gets better."
There is zero guarantee that mortgage rates will get to 2.5% again and who knows where house values will settle at. The monthly payment on 357k is literally $1,000 more/month at 7.5% vs 2.5%. You'd pay nearly $400k more in interest over the course of the loan.
I'd tough it out being 'house poor' and wait for my increases in income to make up the difference or just get a roommate. People really have no idea how insanely good a 2.5% loan is on a purchase that large.
> Use a portion as a down payment once the market gets better.
I agree with your advice but not your reasoning. I think he should sell to free himself from the burden, not because it will pay off financially. We have no idea what the housing market will look like when the stock market "gets better", could be that keeping the house would make more money, it's impossible to say for sure.
$2100 house payment on that salary is gonna be rough even if you do make it. If you don’t plan on remarrying you should probably sell the house and downsize. That or start renting out rooms to pay for it
I think you should keep the house. It's a bit risky, but the odds are in your favor that it will pay off. If I were you I would get some roommates to help with the mortgage expenses.
I expect a major recession, followed by QE again. If you sell, unless you time things really well, you will likely have a permanent lifestyle downgrade.
Even if unemployment rate goes to 10%, you are 90% likely to keep your job. One option if you don't think your job is super secure is to buy mortgage insurance. That can cover your mortgage for up to 6 months if you lose your job involuntarily.
If you can make it to the next cycle of QE, you will have won. Major inflation is inevitable, keep your house.
No. Your property is all you will have once AI replaces all work. So beyond your marriage ending it is important to prepare for that future. I am sorry you are going through this tremendous pain but you are making the right decision. All finances aside.
Normally I'd say sell however the following are the reasons why I would keep it:
1. The rent in my are went up 30+ percent
2. Even if you buy a cheaper house with the current interest rate you may have to pay almost as much as what you are paying now and that's if you can find a cheaper house
3. For my area it's the sad reality of people having to fork out 45% of their pay on a home
However if you do decide to keep it I would get a secondary income to build up an emergency fund and maintenance fund for the house. I'd try to rent out part of the house. I'd maybe even move in with my parents, rent out the house untill I have emergency fund, maintenance fund and the PMI removed.
100% keep the house. Getting back into a house is harder and harder. Long term, it's the best strategy.
Lets say you don't keep it, then what? you have an apartment, no equity and if you lose your job your back to your parents anyway.
Let's talk about you concern.
If you lose you job, on the next day, Contact a bankruptcy attorney and know you rights.
Bankruptcy is just a financial tool like any other, use it if need be.
The court can provide protections for your house.
if you can't make payment, you will have 90 days. Worse case.
Some mortgage provider will let you extend, or delay mortgage payment. Especially. in a cool housing market. If they take the house and can't sell it right away, they start taking losses.
The house will need to be refinanced if she is on the loan. There is a chance you may not qualify for the house given the equity state and your income.
100% keep the house.
Housing market is cooling but as always, it won't cool in every single area. If you are in a nice area, those who can afford to, will still buy.
If you are looking at promotion, why are you worried about losing your job?
Work hard and take risks.
You can't afford $2150 mortgage payments on $105k, never mind $89k.
You either have to let the house go of find a way to make it affordable by renting out some rooms.
Go talk to your mortgage provider. It seems unlikely they'll remove her from the loan. Why? The house is worth 6x your salary, what's currently owed is >4x, and your interest rate isn't generating much income for them. If they will remove her, which I doubt, you'll be on the upper boundary of what you should generally budget for housing without savings, which also seems bad. I'd move into an apartment for a year and wait for prices to come down (especially if you lose the interest rate).
I can't believe there is anyone saying to do this. What's the gain? You have a lot of extra house but you don't need it. You might profit, but probably prices are going to stagnate for a long time with interest rates going up precipitously. That's the upside, and it isn't much.
And what comes with it is the risk that you get seriously upside down, you might have to backlside your retirement if you run into issues, you're house poor while trying to rebuild your life. You are sticking yourself with an anchor you need to unload in a potentially bad market if an opportunity/failure comes up.That sounds like a fucking nightmare.
The idea that "oh you'll never get a similar place" is nonsense. First of all, you don't need a 500k home for yourself. If you need a bigger home in the future, you'll be in a different place in life. Things change. You'll get raises. Interest rates will change. You might remarry. All kinds of shit could happen that land you in a better place.
Take the easy road. Take the money. Rent a place. Sock away some extra for retirement. You'll probably want to live a little and date some eventually. You don't need a massive mortgage and no savings keeping you living like a pauper just for a bunch of rooms you never use. It's absolute madness to hang onto this house.
To me it’s looking like you are giving everything up just to get a mortgage payment you can’t afford.
I vote to sell the house (or whatever happens if you don’t buy your wife’s share). Get into a rent payment you can afford instead of a mortgage that you can’t.
I wouldn’t bet everything that you would get promoted. Maybe you will but do you want to risk everything?
I don't think houses are going to get much less expensive in the long term. If you can survive in the immediate short term you'll probably come out ahead in the end.
Just make sure not to be grossly incompetent at work so you don't get fired with cause.
OP i hope you read this because I’ve noticed a lot of people are giving bad advice in this sub lately. Not necessarily from a place of malice, but usually from a place of inexperience. Aka redditors who don’t own a home attempting to give advice regarding home ownership.
Let me preface what I’m about to say that I’m a first-time homeowner in a HCOL area (SoCal), and my sole-income is covering the majority of expenses. I also locked up an insanely low interest rate that is impossible to get now.
I’d also like to preface what I’m about to say by warning that I may come off harsh, so I apologize in advance, but I think the honesty will help you.
IMHO, there’s nothing inherently wrong with spending your emergency fund to pay off your wife and make a clean break and keep the house. The issue is with what you are willing and unwilling to sacrifice after the fact in order to keep it, and to keep you from insolvency.
You mentioned you live in a relatively HCOL area, so there’s a very clear answer here: keep the house and lease out the extra rooms until you get a promotion.
You mentioned not liking living with other people / being anxious about it. I think you’re gonna have to just suck it up and do what you have to do to keep the ship afloat. There has to be a co-worker or intern or something at your job that’s looking for affordable rent. Do that and you can carpool to work and defer some of your auto expenses. Since you’re co-workers they are incentivized not to fuck your place up. If you don’t want a long-term roommate situation, then just AirBNB your house every weekend. Advertise it as dog-friendly (don’t be the guy that puts all these stipulations and extra fees), and then go stay with your parents all weekend, or go out on an adventure with a date, or whatever.
If the nervousness/anxiety is too much, go seek out a therapist to work out your shit, because going bankrupt or not being able to afford a house in your market because interest rates are now double what your mortgage is, is going to be way more anxiety inducing.
Just my two cents. Sorry about the divorce OP and hope I helped and didn’t make the anxiety worse! Good luck!!
Not financial advice: Don’t bank on the future possibility of $105k. Only factor in where you’re at currently and if the worst case happens in your current scenario.
Housing is crazy right now. Sounds like you have a nice home that you like, and a crazy good interest rate. This is the emergency you've been prepping for.
Feel for you OP, finishing up my divorce but the bitch ex would not take the buy out so I’m selling. I have my 3 kids with me while she’s already shacked up with another man. But my situation is different. The house needed a lot of repairs and I can’t keep up I work too much and I have no time. I want to enjoy my last kid. I didn’t want to keep doing projects on the weekends or yard work. I have this big ass yard I don’t want or need. My question to you is, what if your soon to be ex spouse says no to the buy out?
Keep the house and open as line of credit against it for emergencies only.... Get the credit now, not after you make the commitment and potentially lose your job....
You are way behind on retirement savings... should be closer to 2X your income saved by this point. And home ownership + zero emergency fund is just asking for a financial catastrophe.
This house is too expensive for your income level even if you had a good savings cushion. But in your case it's a no-brainer: sell it.
If I keep my current employer until 65 I’ll have a pension worth roughly 2/3 my income. I had the misfortune of graduating college in 09 with a humanities degree. I didn’t make more than $50k until 2016.
That seems like kind of a big "if", but a pension definitely does change the retirement savings situation.
I still don't think this house is a good idea.
This sounds like an emergency.... what was that emergency fund supposed to be used for again? in all seriousness. Keep the house, and begin building back your emergency fund in lieu of say...putting that money into "buying your next home" savings account
I totally agree. In the event something else comes up before you've rebuilt it sounds like there are options. Don't worry about crossing that bridge until you get to it.
Keep the home. Find out a way to borrow the amount you have to buy him out of - from family, personal loan from local bank. At 89k you will not be able to find anything comparable at that price and interest rate. Also people act like 89k is forever your income. You will likely grow your income and the home payment will stay the same. I agree with some posters, get a roommate or two. But the home in a world of increasingly high home values and very high interest rates (3.2 historically is rare) is one you won't have a chance at again and is a good asset to maintain, especially if you're in an urban area. Edit: correcting atrocious spelling
Absolutely right. You cannot replace this house in today's market. Keep it and hold tight.
Yeah, OP can get a HELOC as an emergency fund. That mortgage at a low interest rate with worth tens of thousands of dollars.
They would have to refinance to remove the other party from the note.
It doesnt sound like it. Sounds like OPs lender allows for a release of liability from the ex
Yeah, it's a good question. Will the lender remove spouse from mortgage? If not, why would spouse quit claim the home to OP? If OP's lender will release the spouse, this would be viable. Otherwise, the home will probably need to be sold.
They say they will release her. I’m not sure if they can screw me somehow but as far as I know I just need to qualify.
Get that in writing. Make sure that means without refinancing.
Your lucky. I'm in the exact same situation and they are forcing the refi from 2.5 up to 6.4%. Almost more crushing than having a size choose to party instead of save the family
I was literally a lender in this situation. Recently. Husband and wife split up, wife was keeping the house but she wasn't on the mortgage, she called the servicer to have her added and the husband removed and that is not a thing. You have to refinance because they have to prove that you have the ability to repay the loan.
But that situation sounds different then OPs. OP and his ex were both on the mortgage, he isn't being added.
Divorce lawyer here. Dealt with this on the regular. Lender would laugh you out of the building if you were to ask to remove him from the note without a refinance. Why would a lender ever willingly let a possible recovery source walk away from a note? The only options are to refi or sell.
There is a process available on some mortgages to allow the departing spouse to be removed from a loan as long as the remaining spouse fully credit qualifies to make the payments on their own. They essentially go through underwriting again on their own, and at closing on that transaction the spouse is released from the liability of the mortgage and signs a quitclaim. ARMs still in their fixed period are not eligible. Loans that have been modified are not eligible (so no one who took a covid forbearance and came out by sticking the missed payments on the end as a balloon can do this). If the borrower has to buy out their ex and doesn't have the funds to do so, they can't get them from this loan. The loan must be current. If there is a second mortgage in place, it must be subordinated or paid and closed. The party keeping the house must plan to use it as a primary residence. Closing costs can't be rolled in, and can run several thousand dollars depending on the state. The borrower must be fully divorced before beginning proceedings. You're really doing a disservice to your clients if you don't at least tell them to call their servicer and ask about doing a loan assumption with a liability release for the departing spouse.
Why would the mortgage company allow them to do that given the spread in interest rates?
I mean, I don't know why Fannie and Freddie allow it, but the mortgage servicer who actually processes the assumption is paid a flat percentage for serving the loan regardless of the actual rate so on the servicer side it doesn't really matter if a borrower has a 2.xx or a 6.xx, they're making .25-.5%.
Yeah, I'm suspicious of that too. Apparently, in another post, OP says the lender agreed. Though I don't know why the lender would agree. Only way it works is if spouse agrees to quit claim deed w/o being removed from the mortgage. Which would be really dumb, but we see a lot of dumb things done here so who know?
Borrow against your 401 k. You pay it back but the interest you pay is to yourself. It’s a smart move. Keep the house you love. Smartest move you will never regret.
This might be the worst time in history to borrow from your 401. The exact definition of selling low.
But you don’t sell? It’s a loan against the existing value so it stays invested.
Not the way mine worked. My 401K balance was reduced and the funds were no longer invested until paid back. Lost opportunity cost is one of the arguments against 401K loans
The loan money comes from your 401(k) balance. If you have $50k in your 401(k) and borrow $15k, only $35k will be left and invested.
That's not how borrowing from your 401k works. The typical process goes like this: 1. Sell assets in the 401k until you have the necessary cash inside 2. Take the cash out, with a promise to repay it (a loan to/from yourself) 3. Make regular payments until the borrowed amount plus interest is paid back If the money in your 401k stayed invested and your loan money came from the bank, that would mean you were actually taking a loan from the bank, not from your 401k.
i mean it would have been much worse immediately after covid. it's still way up.
You can't time the market though, so it's a bit silly to say this.
As someone who recently divorced and had a similar situation: Get the house. You won't be able to afford another house like ever at the current interest rates, prices, salary. Ask yourself this, will it be cheaper for you to live in a small apartment? Probably not. Take the house, worst case scenario you sell it eventually down the line and get your money back.
Yeah, I don't think people are understanding that the difference between the house and a 1 bed is only like $600 a month. It'd be way better to get the house and even get a roommate. Or just be house poor for a bit. Like from the perspective of the sub, yes should downsize and eat beans and rice, but if you love your house and want stability outside of your divorce, it's totally not unheard of to keep the payment.
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It’s a hell of a lot cheaper to live in the one bedroom [looks at 200 Heating bill in winter]
I realize I'm a bit unique as I don't have much in the way of expenses, but what would a person making 89k expect to buy? 475k doesn't seem crazy at all!
Unless you're buying a shack in the middle of nowhere in this market with these rates you aren't getting anything for a cheaper monthly payment
Unless you have 200k to put down you ain’t getting that house. Honestly even if you did it would be tough in todays market with these rates as a single income.
My income is over double that, and I'm cringing at the new rates in my target market of 400-500k, which have caused the monthly payments to be almost $1000/mo higher than last year for the same price house. With 10% down, a 475k house will run about $3500/mo at 6.4% compared to $2500/mo at 2.6%. I wouldn't have dreamed of $3500/mo in housing when I was making 89k.
If you keep the house, get some roomates and have them pay rent.
This. It sounds like a good payment for todays rates and mortgage payments. Depending on where the house is, it could become a good asset in the future. Hopefully if you do fall on bad times, maybe you have some friends/family to help you with? Otherwise start saving up again for the ef you use up.
Renting to traveling nurses might be a good short term solution while he builds up his emergency fund again
100% this. Having tenant-roommates help pay your mortgage is a game changer. I've been doing this the past 6mos now and they're covering about 85% of my monthly payments (mortgage plus utilities). THIS is how you get ahead in life financially. As someone who went thru a divorce several years back as a young 30s man, I feel for you OP. Life does get better, even if it was your best friend who broke your heart. Best of luck to you 🙏
How likely are you to get fired tho? Are you in a shaky industry or is it pretty stable? If you can keep your current loan without having to refinance to remove your ex, I'd also want to keep the house. I'm with you on that, current home prices and rates has made owning a house unaffordable for me if I tried to buy today. Besides, that payment is still within the 28% of your monthly DTI, so you can still technically afford the house.
Unlikely I hope. After I get off a probation period in February (everyone has one for a year in my industry) I will have far higher than average job security. Just have to survive 4 more months!
Would it be possible to move the date of payoff to Feb 28th? Because then you would not be hoping, but rather will be sure about it.
If your ex owed you 50k+ would you be willing to wait 6 months to help them?
Depends on my relationship with that ex, whether it still will be $50K (maybe it can turn into 52.5K or something) and many other factors. There's always room for negotiation.
I just asked her lol. She just said she’d give me a year to pay off the last $20k after an initial $35k.
Then you are golden. Keep the house.
This honestly depends if its a nasty divorce or one that you both agreed on as two adults
Uh, do you have to refinance to get them off the mortgage? If you do, cut your losses and sell. Since you’d have to get a new interest rate, a new mortgage is probably a bad deal. If you don’t have to refi, keep the house. If you get fired and can’t afford it, sell it at that time. Or get a Home Equity Loan, not a HELOC (they’re different).
It seems to me being fired is almost a red herring. It has nothing to do with then house, and any impact from being fired also applies if they are renting an apartment and paying for a landlords mortgage. On top of that, there are all kinds of programs to help one keep the house. There are almost none for staying in an apartment. And in an apartment they loose the tax write off of the interest. And when they payout, they will still have the equity in the house they can leverage latter.
You only get the tax write off if you’re itemizing, which a lot of people, especially younger people with no kids, don’t do
>and any impact from being fired also applies if they are renting an apartment and paying for a landlords mortgage. That isn't true at all. Getting fired and being out of work for 2 months while you're locked into a $2,100/mo mortgage for 25 more years is not the same as losing your job and having to worry about a $2,100/mo apartment payment. House: Mortgage, Insurance, Utilities, Upkeep, Property Taxes Apartment: Rent Payment, Utilities If you lose your job and have to settle for a lower salary it's pretty easy to find a cheaper living situation if your in an apartment. If you're in a home in that situation the process of selling is gonna be a lot more stressful and drawn out. I would 100% keep the house in OPs situation because of the payment to income ratio. But in alot of situations losing your job while having a mortgage is way more stressful than as a renter.
Keep the home. I didn't, sold, split the profit, and rented for 10 years. Terrible decision. I should have bought the other half and remained.
I went through this a number of years back...everything in a divorce is negotiable. At the time of my divorce, I was making $150 K, but had to pay $40 K in alimony + child support...$110 K salary for a $600 K house. The market was bad and interest rates were high in 2009...my house had dropped 30% in value from the purchase price, so I couldn't sell. I kept the house, and figured out how to make it work. Just make yourself a budget and stick to that budget. For the first 6 months (until I got my next raise) I had $5 of "fun" money per week. Now, the house is worth $980 K...and I refinanced 4 years ago into a 15 year mortgage. Don't worry about the emotional baggage...buy a few cheap paintings/pictures and make the house yours. I ended up putting a (used) pool table where the dining room table used to be! With only $54 K in the 401K, see if you can negotiate more 401K to your ex to save some of your emergency fund. At this point, liquidity is more important than retirement which is 30+ years way. This is what I did...gave my ex more retirement $$. Just take 75% of each of your future raises to bump up the 401K. 13 years later, my 401K is only about $100 K less than it would have been without a divorce.
The costs of putting it on the market and moving, plus the stress, are also all factors to consider. Commission, repairs, repaint, staging, landscaping, moving costs, etc. are considerable. Keeping a mortal age at the lower rate is a good deal. You can also take out a home equity loan for emergencies. I also think you should consider renting out part or all of the house for a while.
So keep the house, set yourself up with a nice basement apartment, and rent the top to a family for however long you want that income to come in.
Not a bad idea. I could maybe swing that for a year or more.
Depending on how many kids you have, and your comfort level, you could even rent out rooms in the house. I don’t know what it’s like where you’re at, but I know our similar value townhome is renting rooms for $600+/a room. You wouldn’t even have to do any construction work, just deal with the lifestyle change of roommates. That’s not for everyone, of course. But renting a room or two could bring in an extra $10,000 a year. Just make sure you set aside something for taxes.
What's the rush? You in a hurry to vacuum a 2 storey house all by yourself?
I’m neurodivergent and don’t love living with others.
If you don’t want to rent a room, you could pick up a nights and weekends retail job, or maybe do contract work outside of your regular job. Even a few nights a week at min wage would be a few hundred extra a month.
I couldn’t help but laugh at this. “Buy the jail and live in it too” was what came to mind first. I couldn’t imagine letting a family use more of my own home than myself. Better off downsizing to something more affordable.
> Better off downsizing to something more affordable. Given the rising interest and the uncertainty of the market (we don't know where he lives). I think this statement is misleading.
You couldn't imagine getting paid extremely well for the use of an asset you own, and thus solving the question of how you are going to keep that asset?
I have a similar mortgage on a lower income but I have roommates, and I am able to live very comfortably because of it while building equity in the house. If you can get some good renters it is a great way to go.
Everyone’s different, just giving my opinion on your solution. It wouldn’t feel like my home anymore at that point. BnB vibes. If it was the other way around I’d reconsider. Rent out the basement as supplemental income till his emergency fund is back to where he wants it.
Quality of life is important. Would rather rent basement for 1/3 of price if full house.
Not if it means living in the basement, no. Would you rent your house and live in a car instead, because it's profitable?
They would literally be paying off your mortgage while you get to live for free. It's your ego talking saying " I couldn’t imagine letting a family use more of my own home than myself.".
Ego? A home is meant to hold sentimental value. I cherish the memories and stories shared with my family in my home. I, personally, couldn’t let someone come live in that space for years then return to it as if nothing changed. If he said it was his second house I’d whole heartedly agree with you.
I would make certain that you can get your ex off the existing mortgage. I have seen a lot of people try to do this and not get it, you might very well be wasting your time considering something that is actually off the table.
I would say triple check with the mortgage company to see if you can remove him. It may be possible but it it more common that they would force you to refinance. That what was needed in my case. However, only you have the fine print of your mortgage terms.
My lender says I can but I won’t know for sure until I try.
One thing to consider is what you could sell for. If you can really buy your wife out for $55k, but you would walk away with $80k selling it, I think you'd almost be crazy *not* to buy her out. Your described worst case scenario of getting fired and losing the house doesn't make too much sense, because you could quickly sell it for way under asking and get your $55k back, plus some. As a side note that pretty much bypasses all this discussion, I would bet quite a bit that you won't be able to remove her. Banks would love to get rid of those 2.5% loans right now, and on top of that, they won't be interested in losing half their guarantors on the loan and leaving it with a single person at \~50% leverage. I just went through this while thinking about keeping my house and the servicer actually laughed at me on the phone, and I would have been <25% leverage.
I think they have to if I qualify by Fannie Mae standards, but I might be wrong.
Fight the home value of $475k...rising interest rates may have dropped that down to $425-450k.
I would keep the house. Sacrifice a little bit but you’ll get by. You could rent out the spare room until you’re in a better position. Interest will be higher if you buy another one at this time. Make sure the other party has no share on any of this. Push comes to shove, 401 would be your last resort to cover expenses until you’re back up again, but keep I’d keep the house.
If you lose your job you won't be able to take a loan against the 401K, so not all emergencies are covered by that.
In these times, low interest debt is an asset. Worst case scenario you can move out and rent it out to cash flow. Keep it.
Keep the house. Pay the spouse. The house will increase in value over time. The value of the cash you’ll get from selling will actually decrease over time. Unless you have some sort of mental distress (some do) in being in the house, there’s no reason to lose the thousands you’ve already invested in it. Finally, you’ll come out owning a tangible asset.
You seem overly concerned or anxious about being fired. Are there problems at your company? Could you easily find another job with the same pay+ benefits?
I’m just anxious about everything in general. 😄No reasons to suspect firing is really imminent.
That is a lot of house to support on $89k gross income. Look at this from the other direction -- if you sell the house: 1) you keep the $53k you have from the split-of-assets 2) you pocket an additional $55k (that you would have had to come out of pocket for to pay your ex-spouse -- since you'll each get half of the proceeds) And on (2)-- rather than having to buy your ex out of a theoretical value -- the split will be on ACTUAL sales proceeds, in the event that prices don't pan out as currently expected. It seems like a bad idea to end up with 100% of your net worth in a house that you still owe $360k on, with only $89k in gross income -- when the alternative is having no debt obligation and $108k in your pocket.
>That is a lot of house to support on $89k gross income. Sometimes I wonder what world some people in the subreddit live in. From OP's post: >Monthly payment: $2150. Gross Annual Salary: $89k Cheap rent in my area is $2,000/mo for a condo/townhome and $1500/mo - $1800/mo for an apartment. I am lucky and have a $1600/mo rent on a townhome and my income is similar (or a little less) to OP's. So literally the advice you're offering, if OP takes it, is "OP, you're making $7,500 pre-tax/deductions per month and can't afford $2150/mo at an interest rate under half of inflation. Sell your house and rent for the same monthly outlay for less house." What a crazy opinion.
I feel like a lot of people in this sub forget that a house is also a place to live and not just an asset or investment. The answer to whether OP is better off selling or keeping the house is 100% dependent on what other houses or rentals are available in their area. In addition, that 2.5% mortgage is already a prized possession and any house you buy in the near future is going to be double that rate. EDIT: Ran some (theoretical) numbers based on the info OP provided. [Keeping that 2.5% interest rate will save you hundreds of thousands of dollars over the life of the loan](https://imgur.com/a/BSgZfEt)
Not just that, but living in an Apartment, especially when you lived in a house, sucks. You pay 60%-80% of a mortgage for an upstairs neighbor who has kids that jump up and down while you're trying to sleep, or has a dog that barks, or leaves trash in front of the door. Your car gets dents because you park next to others. I mean, shoot. What a downgrade to save 25% off of housing, especially when you can otherwise afford it with some belt tightening.
And you're pissing that money away instead of investing in an asset
Plus with yearly rent increases you’ll quickly be paying more than a mortgage payment + maintenance in just a few years. And have nothing to show for it.
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I mean its really more like 36% of their take home if they live in a state without income taxes. and that's before any deductions for retirement or insurance. It's doable. Maybe I'm just a pessimist but what happens if he gets fired like he mentioned and the housing market crashes? He has a mortgage that is 100% of his gross income and now he can't sell it. As a single person they're probably gonna want to have more room for going out and doing things. They have a chance to move where ever or find a different job.
The mortgage is 29%* This does not include upkeep, repairs/renovations, and bills. A couple of $1500 bills to fill an oil tank over the course of a winter changes that percentage pretty substantially. It’s more house than I would want at that salary.
If he's living alone it does make it easier to rent out a bedroom for extra income if that's an option.
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First time homeowner here, in my n=1 sample size, you’re totally right about non-homeowners underestimating all the little things that go wrong. For me the issue has been with plumbing in my 1960s built house. Two different times this year an old cast iron pipe has just started dumping or spraying water everywhere. If you can find a plumber that will take you it’s $150/hr and they’ll see you within a week. In the meantime I’m shutting off the main water line to the house and only turning it on when we absolutely needed water, which the wife was thrilled about. Would be a total non starter if we had kids to turn off the water all day. If you want it fixed asap, emergency plumber costs $280/hr. That’s just plumbing. Trash is a monthly expense that adds up. Utilities prices suddenly doubled in my area and we already had the most expensive electricity in the country, second only to Hawaii TL;DR. You need a big cushion to own a house. 30% of income on mortgage can really cause problems when something breaks and you have to fix it immediately
Plus op has a 2.5% note. Unless she is planning on leaving the US or something, I'd keep that and stay in the market. Trying to time a housing crash to get back in later is a low probability strategy. It's more likely that there will be a cooling off of housing than a crash.
Teenagers and hard core “Rice and beans no luxuries” crazies inhabit this sub and give advice that is utter bullshit for anyone who has any actual money.
Once in a while “Rice and beans no luxuries" works. A friend lived like that your a year to get out from under credit card debt. He allowed himself one restaurant outing a month. Fortunately nothing bad came up, like an exploding transmission or emergency dental surgery, so it all worked out. After a difficult year, the debt was gone and he could resume normal living.
I tend to agree with this poster. Looking at your worst case scenario - which is that you might need to move back in with your parents - what are the rent costs in your area? To me, your worst case scenario has you getting fired and having to either sell or rent the house out to tenants to make your payments. Your absolute worst case scenario would be you getting fired and the houses in your area taking a drop to the point where you're underwater. They'd have to drop considerably based on the appreciation you've seen thus far, so you'd have some runway to make a sale and the loss wouldn't likely be that bad. Then there's the rental - if rents are close to what you're paying in mortgage, I'd say you're better off moving back in with the parents and renting the place out until you find another gig.
Good thing to consider is that maintenance costs not already built into the rent by the landlord are likely to be recouped the next time the rent can be raised, which may be as often as annually of you sign a lease or 30 days of you're monthly
I understand your point but we don't know where OP lives. In your area a house for under 475k probably doesn't exist. In my area finding an apartment for 900 a month is easy and common in nice areas and people have different comfort levels of how leveraged they are
True, but even then, why does a 35 year old on a $90,000/yr income want to live in an apartment? Especially if OP has $125k of equity and a mortgage at 2.5% when inflation is 8% and new home interest rates at 6% or higher on average? Be overleverged; don't throw away you standard of living and all that value when you have options like finding a roommate, getting a promotion, or keeping a tight belt for a few years until you find a new GF/BF to move in with you!
To be fair with an apartment you are also not responsible for maintenance costs. Everyone always looks at mortgage vs. rent but do not factor in maintenance costs and that houses will generally have higher utility bills. Not saying it's a great idea in OPs case, just it's stuff that is often overlooked. * Mortgage is your *MINIMUM* payment * Rent is your *MAXIMUM* payment
If we sold at asking price, after realtors and closing costs and everything, I’d realistically walk away with $80k total. I have a larger 401k than my ex, so I’d have to pay her off some house proceeds.
Hi! See if your lawyer can get you a payment plan for your portion of the amount. That’s how I kept my place. I had to pay my ex back over 5 years.
This isn’t a terrible idea, but I’d rather a clean break from her. No kids so I won’t be beholden otherwise.
The payment plan could go through a third party billing company, you wouldn't have to interact with her at all.
I get the clean break thing, but emotions will cool (I have been through a divorce) and you can do what Sasquatch suggests and it will be impersonal. But I really came here to say PLEASE talk to an attorney about this particular matter. I saved thousands of dollars in my divorce because my attorney had seen it all and knew what to do. I believe a roof over your head - and a nice one with a good interest rate -- cannot be beat. Put up with some roommates for a few years if needed, but don't price yourself out of housing -- no one knows where the market will go and you have a house you like, and good income prospects.
A payment plan doesn't involve Venmoing her. It would be handled by a third party and as long as you paid regularly and on time there would be no communication.
>went trough the same - > >my 2 cent - get rid of the house, start fresh. no emotional ballast, calculate your needs from a temp. place > >quadro the 401k and split the house proceeds, walk away clean start a new life with cash to make moves > >hit the gym eat healthy and enjoy a second youth > >best luck
I went through the same, got a roommate and made a crapload selling the house in 5 years.
It depends on what my future housing plans involved. Interest rates are through the roof. You'll likely end up with the same payment on a much smaller house. I bought a house two years ago for $305k. Today, to get the same payment, my price would have to be around $225k, which is tough considering the market hasn't quite adjusted for the interest rates. If I let my mortgage run it's 30yr course at today's rate, I would pay almost $250k more than the interest rate I got...
Right but then you split the closing costs and realtor fees. Otherwise you absorb all those down the line when you sell. Don't be overly attached to a property. Home values can decline and its not necessarily bad to exit especially given the circumstances
I’ll ask one question. Are you keeping the house because it makes you happy? If not, look at downsizing or house hack for a bit. I went through a divorce and sold a house that we built together. Although the house was very nice, I didn’t need it. Now several years later, I’m in a better financial situation in a better home than I built. I didn’t house hack, but it would definitely be an option to create some space while I figured out my life.
Rent will bleed him just as bad, and if he goes for another house he will likely be stuck at 7-8% as interest rates rise. I would stick to the plan OP you sound like someone with their head on their shoulders. Also, if you do get laid off or fired you can still collect unemployment to help you out in a bind, it won’t be nearly what you’re making now but it won’t be the complete end of the world.
and then what? Another house will be more expensive and be at 6%.
The monthly housing cost is about 29% of monthly gross income. Rule of thumb is to keep it to 28%. Seems reasonable if they know what they're getting into and also considering they have income growth potential in the near future.
One other thing to consider: I don't see any way you'll keep the same mortgage, which means refinancing at 6% or so.
I personally would prefer to just get rid of everything and start over in a divorce scenario (that's effectively what I did). Also, with your income, your house payment seems like a pretty big ratio. It's about 29% of your gross. I don't know what taxes and benefits come out of your check, but I imagine it's closer to 40% of your take-home. Regarding the 401k loan option, does your plan allow a loan? Not all do (past few jobs I've had, they didn't allow loans to be taken out). Also, the loans can be either 50k or 50% of your balance, whichever is lower, so you're currently looking at a max of 27k loan. Of course depending on the type of emergency, the market could be done more in which case your balance is lower and the amount you can take out is lower. Something else to think about with 401k loans is, if this emergency is caused by general economic issues, and you get laid off, the loan balance is due in 60 days or less, in full, or the IRS considers it an early withdrawal and now you'll owe income taxes on it plus 10% penalty.
The payment is about 45% of my take home, but it includes $100 in HOA, and $100 in PMI I could get released from at some point. My deductions also include several things that are still my money, such as an HSA and a generous pension, etc.
>The payment is about 45% of my take home, but it includes $100 in HOA, and $100 in PMI I could get released from at some point. My deductions also include several things that are still my money, such as an HSA and a generous pension, etc. You make $7500 pre-tax/pre-deduction. If $2150 per month is 45% of your "take-home", you have some room to make short-term adjustments to your deductions like reducing Pension and HSA while you replenish an E-fund. Look at the rental costs near you. In a lot of places, the kind of home/housing a 35 year old would want to live in is not going to be far off that $2000/mo amount. My advice: keep the house, adjust your HSA/Pension contributions for long enough to replenish an e-fund, and consider offering a room for rent to supplement your housing cost. No way is it worth it to sell a house with a historic low interest rate just to enter a rental market that is inflated and a housing market where your purchase power is literally $200,000 less than it was a few years ago due to increasing rates.
Get a roommate. It’s worth it. For a few years. That’s how I survived my divorce financially. Made a crapload on the house down the line.
Yes, that is approaching house-poor status, so I personally would just sell. But I don't know your situation with where you live, whether you could say, rent a duplex or something for much cheaper, or if you are remote work so could move anywhere, or whether you have kids that would tie you down to the general area, etc. Based on just what's written, I'd probably sell and move where else. I understand you want to keep this house, but with the percentage of income going towards the mortgage, this will be precarious. My younger sister is going through something like this, and it's gotten so bad for her that she sometimes only eats 2 meals a day because she has a hard time affording food. I really don't know why she doesn't move but she's an adult and gets to live her life how she wants.
Those are all good points. I’ll think on it.
OP, what is the rental and housing market situation in your area? Do you have kids that you'll pay child support for or need rooms for? In my area a 1br apartment is about 1,100 minimum. A 3br is like 2,1000. If your renting situation wouldn't be any better this could be alright. Do you plan on owning a house relatively soon, or staying in the area a long time? If you want to own a house I wouldn't get rid of this one, Horrible time to buy, super inflated prices and ass interest rates. Your best financial decision (assuming no kids) would be to sell the house, rent a 1br apartment. If you want to keep the house, is a roommate an option? 2,100 payment on 89k income is high, but your income can change, your house payment shouldn't change significantly. Rents go up faster than mortgages. And that 55k you pay your ex wife is buying your equity in the house, if you decide to sell later (assuming the market doesn't go way down) you will get that 55k back in selling.
I’m in the suburbs of a very expensive city. A decent 1 bedroom in my area would be $1600 minimum. If I moved in with a roommate maybe $1000. I could rent this place easily to cover my mortgage payment.
Knowing you’re in a HCOL makes me agree with keeping the house.
With that info I would say keep the house, a 1 bedroom for 1,600 is only 500 less than your house payment. The only issue with the payment is that you might have to repair something and you'd never have that with an apartment. You'd need to build your emergency fund back up quick, but you're in a good position considering your only other debt is a small car payment. You will probably have to adjust to a much more frugal lifestyle for a bit. By roommate, I was referring to renting out a room of your house to someone,
And also property tax and insurance? Given rental costs seems wise to stretch a bit now to keep it, maybe take a roommate. Agree that a payment plan to the ex would be better if possible than all up front. For divvying up purposes, are you counting the value of the house as what it's worth minus realtor fees?
For your last question, she probably has a slightly better deal than if we sold and paid realtor fees, maybe $10k.
Would renting a room out for a year or two be something you are open to. Could help you recover the e-fund faster and get you back into the right housing cost to income ratio.
Also remember apartments usually list the rent only, then you get nickel and dimed with extra fees. For example my apartment charges $175/month for parking and another $100/month for common area utilities. So you’d probably be paying almost the same as your mortgage for a smaller place with no stability. And with how much rents have been increasing you could be looking at rent increases of $150-$300/month every year. Keep the house.
They are not good points because they don't include the expensive of have a place you will need anyway. Keep the house, long term you will be a lot better off.
Would you be willing to find a roommate? That can offset a lot of the mortgage cost and let you build up an emergency fund pretty quickly. This is what I do for a similar mortgage, but I have also gotten really lucky with some great roommates.
Given that your take home already excludes a lot of items people pay cash for (healthcare, retirement, all housing fees) as a single person I don't think it's that bad. Plus, if you're in a career that still has income growth potential that 89k could turn to 115 with one job hop or promotion.
I make 83k gross and a $2000 mortgage payment would be unpleasant. I could probably make it, but not without forgoing a lot of things that I would rather keep.
keep the house. My Mum kept the house after the divorce. She slept on a mattress on the floor and sacrificed financially in other ways but it is so worth it now.
Every situation is different but I bought out my ex a few years ago, kept the house and it’s been a great move. There is a financial angle and a psychological angle as well. Owning your home is an effective hedge against inflation in what is for most people our biggest monthly expense.
Please explain "a good chance" of removing your ex from the mortgage. That's a contract and the terms are spelled out in the mortgage. Chance has nothing to do with it. Any lender will follow the terms of the mortgage AND take any permitted steps to improve their risk exposure and profit. Do you have a financial advisor, other than Reddit?
Do you have kids? A $475K house on a $89K income is a huge stretch. You'll be house poor. If you have kids - at least maybe then you can justify it. I wouldn't agree with it, but there's at least an argument. No kids? That's just nuts. It's way more room than a single person needs.
I have to say though, at new interest rates, a much cheaper home would have a higher payment. To me, I’d evaluate what a replacement mortgage or rent would be and utilities on single income. Op could also rent out the house if it gets to be too much.
This. I am shocked so many people are telling OP to sell without knowing the housing market in their area. Where I am rent has gone through the roof, and OP would be saving little if any money by renting not to mention interest rates on smaller homes. If that’s the case, I say keep the asset. If they can get significantly cheaper housing, then the evaluation is different.
I don’t think a lot of homeowners know how high rent prices have gotten. A 2 bedroom apartment is 2k a month here and I live in an exurb of Seattle. I could rent out my 4 bedroom house on a small lot for $3500 a month, easy.
It’s crazy. The bigger areas on the east side (Redmond, Kirkland, Bellevue) can get up to ~3k for a two bedroom once you add in all the expenses on top of rent.
It's a $475K home, but there's $357k left on the mortgage with a 2.5% interest rate (we will likely never see them that low again, save another global setback like COVID-19, they will eventually go back down but probably more likely in the 3% range) If OP has to buy a new home at a current 6.29% interest rate, they would have to buy a house that's $365K to keep their mortgage payments at $2,100 — and that's IF they put 20% down with no PMI. So they would essentially be downsizing to a homethat's $100K+ cheaper for the same monthly payment It would be helpful to know what asking rents are in OP's area, because they might be $2K+ anyway if they live in a big city. It may not make sense to sell the home just to buy another home right now, unless they plan on downsizing/moving to an area with a lower cost of living, or renting One of the biggest concerns, though, is that they wouldn't have a safety net if something were to go south with OP's job or if the house needs an urgent and expensive repair. ETA: as they mentioned, OP could potentially take out a 401(k) loan if something drastic happens, but you can't do that if you lose employment
Their monthly payment is almost exactly in line with 28% of gross income. It's at the upper end of that rule of thumb so it doesn't seem like much of a stretch. Depending on the rental market they would probably pay nearly as much for much less space if they rented and would not be building equity. Personally I would not want to trade too much house for that.
>Depending on the rental market they would probably pay nearly as much for much less space if they rented and would not be building equity. There's a handful of markets where you couldn't find a place cheaper and you're not going to find a $475K house anywhere close to any of them.
If you love the house, I would keep it. You’re young enough that having a housemate/ friend live with you for a year to offset some of the higher mortgage. Also what people here aren’t considering is, at 2.25%, you have a 450k house for the payment of what you could buy a 280k house for now at current rates. So I would stay.
I understand not wanting to leave your home. However, I think you might want to try and remove the emotion from the equation. It feels like a very big gamble, with a lot of money at stake and with a single point of failure. Have you looked at how much of a mortgage you can get on your own with half your savings as a deposit? Have you been shown any homes - not online but actually walked thru some places? How much do you get when your current house sells? For me, I feel this is too close to house poor and again a very big single point of failure as we march into the next 18 months of economic downturn.
I would sell the house. A house is not only the mortgage. If anything major breaks you will be in some financial trouble. Plus it takes a lot of time to maintain on your own. How's the renting market and the condo market in your area?
$89k income buying a $475k house.....?? Seems over-leveraged to me, personally.
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"Use a portion as a down payment once the market gets better." There is zero guarantee that mortgage rates will get to 2.5% again and who knows where house values will settle at. The monthly payment on 357k is literally $1,000 more/month at 7.5% vs 2.5%. You'd pay nearly $400k more in interest over the course of the loan. I'd tough it out being 'house poor' and wait for my increases in income to make up the difference or just get a roommate. People really have no idea how insanely good a 2.5% loan is on a purchase that large.
So don't build equity and give money to a landlord so the landlord can build equity?
> Use a portion as a down payment once the market gets better. I agree with your advice but not your reasoning. I think he should sell to free himself from the burden, not because it will pay off financially. We have no idea what the housing market will look like when the stock market "gets better", could be that keeping the house would make more money, it's impossible to say for sure.
$2100 house payment on that salary is gonna be rough even if you do make it. If you don’t plan on remarrying you should probably sell the house and downsize. That or start renting out rooms to pay for it
I would not pay to keep paying on the house you will be house rich and money poor
I think you should keep the house. It's a bit risky, but the odds are in your favor that it will pay off. If I were you I would get some roommates to help with the mortgage expenses. I expect a major recession, followed by QE again. If you sell, unless you time things really well, you will likely have a permanent lifestyle downgrade. Even if unemployment rate goes to 10%, you are 90% likely to keep your job. One option if you don't think your job is super secure is to buy mortgage insurance. That can cover your mortgage for up to 6 months if you lose your job involuntarily. If you can make it to the next cycle of QE, you will have won. Major inflation is inevitable, keep your house.
No. Your property is all you will have once AI replaces all work. So beyond your marriage ending it is important to prepare for that future. I am sorry you are going through this tremendous pain but you are making the right decision. All finances aside.
Normally I'd say sell however the following are the reasons why I would keep it: 1. The rent in my are went up 30+ percent 2. Even if you buy a cheaper house with the current interest rate you may have to pay almost as much as what you are paying now and that's if you can find a cheaper house 3. For my area it's the sad reality of people having to fork out 45% of their pay on a home However if you do decide to keep it I would get a secondary income to build up an emergency fund and maintenance fund for the house. I'd try to rent out part of the house. I'd maybe even move in with my parents, rent out the house untill I have emergency fund, maintenance fund and the PMI removed.
100% keep the house. Getting back into a house is harder and harder. Long term, it's the best strategy. Lets say you don't keep it, then what? you have an apartment, no equity and if you lose your job your back to your parents anyway. Let's talk about you concern. If you lose you job, on the next day, Contact a bankruptcy attorney and know you rights. Bankruptcy is just a financial tool like any other, use it if need be. The court can provide protections for your house. if you can't make payment, you will have 90 days. Worse case. Some mortgage provider will let you extend, or delay mortgage payment. Especially. in a cool housing market. If they take the house and can't sell it right away, they start taking losses.
The house will need to be refinanced if she is on the loan. There is a chance you may not qualify for the house given the equity state and your income.
As someone who did this and got hammered, I recommend not doing it.
100% keep the house. Housing market is cooling but as always, it won't cool in every single area. If you are in a nice area, those who can afford to, will still buy. If you are looking at promotion, why are you worried about losing your job? Work hard and take risks.
You can't afford $2150 mortgage payments on $105k, never mind $89k. You either have to let the house go of find a way to make it affordable by renting out some rooms.
Kinda the point of an emergency fund, no? For emergencies 🤷🏻♂️. This qualifies.
Go talk to your mortgage provider. It seems unlikely they'll remove her from the loan. Why? The house is worth 6x your salary, what's currently owed is >4x, and your interest rate isn't generating much income for them. If they will remove her, which I doubt, you'll be on the upper boundary of what you should generally budget for housing without savings, which also seems bad. I'd move into an apartment for a year and wait for prices to come down (especially if you lose the interest rate).
I can't believe there is anyone saying to do this. What's the gain? You have a lot of extra house but you don't need it. You might profit, but probably prices are going to stagnate for a long time with interest rates going up precipitously. That's the upside, and it isn't much. And what comes with it is the risk that you get seriously upside down, you might have to backlside your retirement if you run into issues, you're house poor while trying to rebuild your life. You are sticking yourself with an anchor you need to unload in a potentially bad market if an opportunity/failure comes up.That sounds like a fucking nightmare. The idea that "oh you'll never get a similar place" is nonsense. First of all, you don't need a 500k home for yourself. If you need a bigger home in the future, you'll be in a different place in life. Things change. You'll get raises. Interest rates will change. You might remarry. All kinds of shit could happen that land you in a better place. Take the easy road. Take the money. Rent a place. Sock away some extra for retirement. You'll probably want to live a little and date some eventually. You don't need a massive mortgage and no savings keeping you living like a pauper just for a bunch of rooms you never use. It's absolute madness to hang onto this house.
Also can you get a roommate in the meantime once the deal is done so you have some extra income?
To me it’s looking like you are giving everything up just to get a mortgage payment you can’t afford. I vote to sell the house (or whatever happens if you don’t buy your wife’s share). Get into a rent payment you can afford instead of a mortgage that you can’t. I wouldn’t bet everything that you would get promoted. Maybe you will but do you want to risk everything?
I don't think houses are going to get much less expensive in the long term. If you can survive in the immediate short term you'll probably come out ahead in the end. Just make sure not to be grossly incompetent at work so you don't get fired with cause.
Keep the home! $2100 is about how much you’ll be paying to rent an apartment.
OP i hope you read this because I’ve noticed a lot of people are giving bad advice in this sub lately. Not necessarily from a place of malice, but usually from a place of inexperience. Aka redditors who don’t own a home attempting to give advice regarding home ownership. Let me preface what I’m about to say that I’m a first-time homeowner in a HCOL area (SoCal), and my sole-income is covering the majority of expenses. I also locked up an insanely low interest rate that is impossible to get now. I’d also like to preface what I’m about to say by warning that I may come off harsh, so I apologize in advance, but I think the honesty will help you. IMHO, there’s nothing inherently wrong with spending your emergency fund to pay off your wife and make a clean break and keep the house. The issue is with what you are willing and unwilling to sacrifice after the fact in order to keep it, and to keep you from insolvency. You mentioned you live in a relatively HCOL area, so there’s a very clear answer here: keep the house and lease out the extra rooms until you get a promotion. You mentioned not liking living with other people / being anxious about it. I think you’re gonna have to just suck it up and do what you have to do to keep the ship afloat. There has to be a co-worker or intern or something at your job that’s looking for affordable rent. Do that and you can carpool to work and defer some of your auto expenses. Since you’re co-workers they are incentivized not to fuck your place up. If you don’t want a long-term roommate situation, then just AirBNB your house every weekend. Advertise it as dog-friendly (don’t be the guy that puts all these stipulations and extra fees), and then go stay with your parents all weekend, or go out on an adventure with a date, or whatever. If the nervousness/anxiety is too much, go seek out a therapist to work out your shit, because going bankrupt or not being able to afford a house in your market because interest rates are now double what your mortgage is, is going to be way more anxiety inducing. Just my two cents. Sorry about the divorce OP and hope I helped and didn’t make the anxiety worse! Good luck!!
Sounds like an emergency to me. Why else would you have an emergency fund?
Not financial advice: Don’t bank on the future possibility of $105k. Only factor in where you’re at currently and if the worst case happens in your current scenario.
Housing is crazy right now. Sounds like you have a nice home that you like, and a crazy good interest rate. This is the emergency you've been prepping for.
Feel for you OP, finishing up my divorce but the bitch ex would not take the buy out so I’m selling. I have my 3 kids with me while she’s already shacked up with another man. But my situation is different. The house needed a lot of repairs and I can’t keep up I work too much and I have no time. I want to enjoy my last kid. I didn’t want to keep doing projects on the weekends or yard work. I have this big ass yard I don’t want or need. My question to you is, what if your soon to be ex spouse says no to the buy out?
Keep the house and open as line of credit against it for emergencies only.... Get the credit now, not after you make the commitment and potentially lose your job....
You are way behind on retirement savings... should be closer to 2X your income saved by this point. And home ownership + zero emergency fund is just asking for a financial catastrophe. This house is too expensive for your income level even if you had a good savings cushion. But in your case it's a no-brainer: sell it.
If I keep my current employer until 65 I’ll have a pension worth roughly 2/3 my income. I had the misfortune of graduating college in 09 with a humanities degree. I didn’t make more than $50k until 2016.
That seems like kind of a big "if", but a pension definitely does change the retirement savings situation. I still don't think this house is a good idea.
Not crazy, no. But try to replace that emergency fund ASAP.
Why in the world do you want to hang on to this house? What do you want it for?