I’m trying this again, last time this blew up for all the wrong reasons. I’m 37f, going through divorce. I don’t really want advice on how much we each should each be getting or who is or isn’t entitled to what and all the specifics. Just what you think is the better long term financial decision. Our house equity is about $150k. Our combined 401k is also about $150k. We have about $40k in savings. No debt other than the mortgage.
Option 1 (leaning towards) – I keep the house and buyout his share of the equity of about $65k. To do this, I would let him take most of the cash, and most all of my share of the $401k. (I keep his $65k house equity, he keeps my $65k 401k share). I get to keep the mortgage of only $70k at a 3.75% interest rate. I know I can keep the mortgage and don’t need to refinance. This would let me keep maybe $20k in my 401k. So not totally empty, but not great.
Option 2 – we sell the house and split the proceeds evenly, 401k and cash evenly. I buy a new home probably similar valued home, but will likely have a higher monthly payment at a new higher interest rate, and the mortgage will be larger. Would have more cash on hand and in my 401k though.
One small caveat is we have two young kids, so there is a non-financial factor of keeping the house to provide the kids some stability during this period.
Divorcing – better to sell house and split 401k, or keep house and give up 401k
byu/Feisty-Visit1635 inpersonalfinance
Posted by Feisty-Visit1635
25 Comments
Sell and split. Don’t give up your share of retirement investment. Your investments will be worth more than your house over time.
ETA: as people have mentioned, this is city-dependent, but I stand by this opinion. Your retirement is less replaceable than a house.
If the mortgage is assumable, there is some value to that interest rate, and I don’t see a huge concern to going with option 1. Especially considering the stability it can provide. You’ll need to play catch up on retirement but the house is a separate issue.
Keep house. You won’t get that good of interest rate and it’ll be better for the kids.
Then paint everything in a color you know he wouldn’t approve of as therapy.
Keep the house. That interest rate and remaining mortgage balance is irreplaceable. Only you can put a value on the stability and continuity of keeping your family home. With the lower payment and no relocation costs, you can build the 401k back up faster than you can pay down a new mortgage.
What’s you income, hard to put these balances into perspective without it? Besides the mortgage if you were to move would you be moving to a smaller place that would lower your other monthly bills? If your goal is to buy a similar house when done then just buying your ex out of his equity and keeping a low rate mortgage may make sense.
Can you afford that house along going forward?
I would let it go if I could find some with new that was less expensive. Why stay with the old memories.
Are you sure that the mortgage will allow you to put it in your name only without a refinance?
Keep the house. Low interest/payment and stability for kids far outweighs larder 401k in my eyes (as long as it doesn’t need a ton of work..). 401k amount isn’t crazy large so you can build that up quickly.
Factor in that you’ll have to pay rent, and there’s possibly a significant cost to sell (realtor, possibly taxes). Most likely, I’d keep the house and see if your stbx will cover some of the future house transaction (realtor) costs, unlikely, but possible.
>I buy a new home probably similar valued home…
If you’d buy a similar home, then just keep what you have. No reason to sell and buy. But I would try to keep retirement savings. Can you use a HELOC to pay for the equity transfer to your ex?
This is probably a question better for an accountant or lawyer. Are there tax implications for either option? On the one hand I would think buying a house now & with today’s rates, your housing costs could increase significantly if you keep 401k. On the other hand, the gains on the 401k could make it worth it. I think you need to run the calculations on both scenarios.
What does your lawyer say?
If you’re 100% sure you can keep the mortgage rate, and you can afford the payments/upkeep on the house, and your kids need to stay there, then it’s an option to consider.
How secure is your job? That’s leaving you with a low emergency savings fund. Assuming he’s paying child support, factor that in.
Math says keep the house
Just make sure your able to keep the house emotionally. I know if I were in your shoes I’d want to leave my home but that’s just me
Option 3? Get a home equity loan or second mortgage and use it to pay off your ex-partner’s equity
I think the least disruptive thing for your kids would be option 1.
Question about Option 1: If you keep the loan, would you assume the loan and have your ex taken off the loan? I think he would want that as a condition.
Keep the house – you’re still young enough build up your 401K – uprooting your kids, trying to find a new living space…..there’s much more to consider – if your 401K is only 65K, keep the home and rebuild your retirement. Assuming you are working, you also will need to find childcare depending on how young they are unless you live around family that helps.
Keep the house and part of the 401k. The 3.75% rate is cheap rent … and your kids need some stability. Good luck.
What does your lawyer say? Also, please speak with a financial planner to go over different scenarios.
Divorce lawyer here. They have certified divorce financial analyst (CDFA) that can help you make that decision.
Keep the house do a QDRO for the retirement assets, you have plenty of time to re accure, however buying house and getting that interest rate ain’t happening soon
A recently divorced friend of mine kept the house but was forced to refinance and lost his low interest rate. Are you 100% sure you keep the mortgage rate? Do you the scenarios when a divorcee has to vs doesn’t have to refinance?
I’d totally keep the house and low interest rate if you want to stay there long term with your kids. You are young enough to build up your retirement but getting a decent priced house at low interest rate will not happen again. And it will cost $10k to sell and another $10k to buy.
How are you getting him off the mortgage without refinancing?
I think those saying the 401k will grow faster than the house equity are correct, however…
Buying a new home of similar value will cost you a higher interest rate and what, $20k in realtors and moving expenses? If you want to stay in the home, stay in the home. Take the difference between your cheaper mortgage and what a new mortgage would be, and put it in a Roth IRA.