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.

 

[Boarmaster]

If at all possible he shouldn't lose that 2.5% financing loan. He should look in a home equity line of credit for the second mortgage to raise the cash to pay her off. They are generally lower interest and balance can be paid down and then used as needed later. Some also have then option of locking in should interest rates get favorable again.

 

[Jimbee]

Your friend could come up with a reasonable child support/alimony/equity amount that would work, have his lawyer draft it and hope she accepts it. Give her an out.

 

[Rich M]

Work thru this stuff with the atty.

Divorce sucks.

 

[Crowmangler]

"She wants him to"... stop right there for a sec. I'm making no assumptions but sounds like she is the one who blew everything up & wants him to help make her life easier for what is another example of a woman making a stupid decision. Tell him to play hard ball when negotiating all this. He can & should make demands too.
Marriage is love... divorce is business

 

[Cady Creek]

If kids are involved, that is a roof over their head when he returns. And he's entitled to joint custody. He should get the house, especially if she left. But, will likely have to buy her out. This is where its going to get messy. Best to get her to agree on a set amount before it starts to get ugly. Which most of them do. He'll owe her for half of everything left in the house as well.
Don't ask me how I know..

 

[go_deep]

Sell it all. Divided by 2, are minusing legal fees.

 

[cnelk]

Sell it all. Divided by 2, are minusing legal fees.

Exactly.
I went through this 15 years ago.

The house and everything in it are material things and can be replaced.

I was lucky though, I bought her out, kept the house. She took anything she wanted (that was gained during the marriage) with no resistance from me.

Do not argue over petty stuff. Let it go.
Move on as quickly as you can.

 

[browning2480]

He needs to start with visiting the legal office in whatever base/post he is stationed at. Free advice to get him started and then he needs a good civilian divorce attorney.

 

[Jimbee]

Exactly.
I went through this 15 years ago.

The house and everything in it are material things and can be replaced.

I was lucky though, I bought her out, kept the house. She took anything she wanted (that was gained during the marriage) with no resistance from me.

Do not argue over petty stuff. Let it go.
Move on as quickly as you can.

This. Plus the cost and hassle of selling and not knowing what stuff will sell for vs. "value".

 

[KenLee]

Rental income = higher child support payments. No way in hell I'd buy her out at half of true equity plus pay her more per month.

 

[KenLee]

Tell Buddy to hire a good Private Investigator yesterday and keep his pecker dry.
Getting rid of any chance of paying alimony is his best investment right now.

Edit: Looked up Hawaii alimony law. Adultery doesn't cut off potential right to alimony. Ain't that some bullshit!

 

[ben h]

I'd sell it, split equity and be done with it. If your buddy really wants the property, they could list it, with himself as an excluded party and he could match any offers and execute if he wants and not pay any realtor fees. He'd still be on the hook for a new loan. No way I'd pay her the equity of what it appraises at which is just an estimate of a potential sale. For example my family (multiple owners) has an apparaisal on a property for $2.1M and it's listed for sale at $1.85M and we don't have any offers, so I say it's worth less than that. This is how we sell properties and if some members want to keep them they can and everyone feels market price was established fairly.

 

[Rich M]

If he wants to leave a mark - sell it all - everything they own. Then divide the proceeds. Then negotiate the rest - CS for kid and alimony for wife. The mere selling of everything they own will put her at ground zero.

Financial folks are starting to tell newlyweds to keep separate finances. This is why. Say 50% chance of divorce, either don't get married or protect yourself when you get married.