keep the house after divorce? financial advisor?

[bojangles808]

Trying to help my friend out but I feel a bit over my head on this one with giving him advice and know theres a lot out there in this community who have experience (both finance and divorce) so figured I'd give it a shot. Were in rural hawaii so getting professional advice on various matters isn't always the easiest. Basically his wife left him, took the kids to another island and filed for divorce, They are currently in mediation and he has consulted with a lawyer but he's trying to figure out if he can keep their house..

The house they own is on another island that neither live in right now that is rented out as he's stationed elsewhere (he's military). He bought the place maybe 8 years ago, built a second detached in law suite maybe 5 years ago and refinanced his original loan at 2.5%. with the loan to build the inlaw suite is paid off and with both the house and in law suite rented out + appreciation + low interest rate , it provides some really really good income while he been stationed elsewhere. He could possibly retire there too in the future.

Ex wants him to buy her out and cut her a check for half the equity (approx 240k) place just appraised for approx 900k. I told him to start shopping around for a home equity loan and log all his monthly expenses so he can get an idea for what his exact numbers are. but this is where we are getting confused and over our heads.

I'm pretty sure he just takes his monthly income (paycheck + military housing allowance + plus rental income) and less monthly expenses (child support + bills + monthly expenses+ mortgage+ rent + possible home equity payment) and see if he can survive.

Is there anything more to this?

Home equity loan > heloc right? He's in the military too so obviously shopping around for any programs he can benefit from but i think since it's not a primary home (rental) things might be a little stricter. I dono if its a good idea to take out a little more, something like 300K, (cushion, lawyer costs?) either.

he doesn't have any truck payment or any stupid debt like that so i think it's pretty straight forward with the numbers. Just food, gas, cell phone bill, insurance etc normal stuff. The part that is still mysterious is the child support which could be in the 2-3k a month range so that possibly could swing things one way or another. I'm really hoping he can keep the house, because him building the in law suite + plus refinancing the low interest rate really has him set up tremendously in the future. It's in hawaii too and only going to appreciate more/create more financial stability for him.

WHo would he reach out to for better assessment of his financial options? seems like "financial advisors" are mostly retirement related but is there a subset for this type of divorce situation? or is it better off going with someone local, edward jones type? any guidance is appreciated.Thanks in advance

 

[Ucsdryder]

Did he own the house before they got married? I think most states are different but if he owned it before, she might be entitled to the appreciation while married, but he should get the equity at time of marriage.

Meaning…

He had 300k in equity on day of wedding

House currently has 500k in equity. 500-300 =200/ 2 =100k to her.

At least this is my understanding in the state it live…

 

[Flatgo]

No clue on the financial side of things and what pencils, but having just gone through a divorce where my ex-wife basically walked away too. To keep an asset like a rental house it would have to be seriously cash rolling to deal with that stress on top of all the other stress that comes with a divorce.

When I looked into keeping my house a refinance was a way better option than a home equity loan. ( I don’t think there’s any real difference between a heloc and a home equity loan) The interest of the home equity loan was substantially higher than the refi rate. To where the combined rate was still higher even with 3.5% fixed rate mortgage for the primary loan. Rates may be different now, but that was my conclusion. Also unless the initial loan is only in his name, he will need to assume that loan. Some banks allow this others do not so check on that before you go to far. Also there are some weird rules with an assumption where the will only look at the appraisal at the time of the initial mortgage. Any refi/assumption/hel they will factor child support requirements so that’ll need to be figured out, which could take forever through the state.

Also not sure the in and outs with a rental, but they will calculate a debt to income ratio too which includes child’s support, and I believe it can’t be more than 43%. Which is way too stupid high to live on anyways.

I’d contact the initial lender and start calling other mortgage companies to figure out options.

I wish him luck divorce sucks and unfortunately they guy typically gets screwed.

 

[wapitibob]

Buy her out with a cash out refi and keep the house. Her money will be gone in 2 years and he'll have an income producer for life.

 

[bojangles808]

Did he own the house before they got married? I think most states are different but if he owned it before, she might be entitled to the appreciation while married, but he should get the equity at time of marriage.

Meaning…

He had 300k in equity on day of wedding

House currently has 500k in equity. 500-300 =200/ 2 =100k to her.

At least this is my understanding in the state it live…

they bought it after they were married. the 240k payoff and 900k appraisal are some of the few hard numbers he;s got to work off of as of now.

 

[bojangles808]

Buy her out with a cash out refi and keep the house. Her money will be gone in 2 years and he'll have an income producer for life.

thats what Im trying to get him to pull off. I'll have him give a look at a cash out refi except i think he;d lose that 2.5% though?

 

[Dawg In Montana]

HELOC is a line of credit with a variable interest rate while a home equity loan is like a car loan in that you borrow money once and have a fixed term and rate for the life.