Pass_Little t1_j6l5bko wrote on January 31, 2023 at 2:28 AM

When I divorced, I never could get a refinance on the unique property we had bought together that I had kept.

Although it is ideal that you refinance or sell, it certainly is common in a divorce for this to happen.

My advice is for you to determine your shared net worth and figure out how to divide that equally as of the sate of the divorce. If there is $50K equity in the house and she's going to end up with the house, then you need to send up with something worth $25K.

Or said differently: after the divorce, the net worth you both take from the marriage should be identical. If she's taking $25K of equity in the house, you should take $25K in equity in something else (car, cash, etc.)

From the point the divorce is final she should be 100% responsible for the house.

The other critical point is that for anything which isn't a clean break such as the house, you need to have in your divorce decree language that lets you take unilateral steps to prevent a default on the underlying loan. That is, if she stops paying, you can assume payments, and if you have to do this there should be serious penalties. There also should be language which permits you to either require immediate refinance or immediate sale if she stops paying. You'll want a lawyer to check out the language which gets used here.

What you're trying to do is to create a situation where you're being completely fair, yet protect yourself down the road.

I also understand the desire to get paid for having the mortgage on your credit report. If you want to add a term in there where you get paid $x per month for as long as your name is on the mortgage that doesn't seem unreasonable. I would avoid one time payments, as if she keeps that for 20 some odd years you'll want to be paid for 20 years. I might consider indexing it up over time, so that it becomes more and more advantageous for her to refinance. IE $100/month for the first year and increasing 10% per year thereafter. Not suggesting you use these figures, just using those as examples.

yeldarUV OP t1_j6l6dwi wrote on January 31, 2023 at 2:36 AM

Thank you so much for taking the time out on this reply. My head is kinda exactly where yours is at on this. The equal division makes a ton of sense. I thought about getting an appraisal soon to see if the cost of the house has went up and from there decide an initial payment from her. From there I would have something that states my name could be on the mortgage for X amount of years and by a certain time my name has to be off. We talked about 2 years to allow some time for interest rates to drop (or increase which would suck for her lol) During that time there could be a monthly comp until my name is completely off. At this time maybe another appraisal and split payment on that as well? I don’t know just spitballin lol.

Anthropogenic_Noise t1_j6lro95 wrote on January 31, 2023 at 5:39 AM

A potential increase in interest rates in those 2 years would suck for her, but for you too if you don't plan on renting forever.

Pass_Little t1_j6ly3ek wrote on January 31, 2023 at 6:52 AM

No need for the second appraisal, but the first one is a good idea. If you both want to save money, many real estate agents will also do a similar valuation for less money.

The point here is that at the point you divorce your house will be worth a certain amount and you'll owe a certain amount. The difference will be the equity. That amount needs to be split between you, 50/50 is usually the right ratio unless there is a serious reason not to. A good example of this type of reason would be for one of you to have depleted your life savings to make the down payment while the other one didn't contribute anything.

Once you're divorced, the house and equity isn't yours anymore. She's making all the payments, so she should get all the equity. Unless you have to repo it from her due to lack of her keeping up on the payments. So forget about a second appraisal. By getting divorced and letting her have the house you need to give up on any future benefits from it so don't tie any payments to the value of the house.

Instead any payment from her to you needs to be compensation for you tying up your available credit and taking on the risk that she will end up trashing your credit. Think of what a single missed payment will mean to your credit score. The fact that she can't afford the payment after a refinance indicates that this might be too much house for her, and she runs a high risk of default. I'd think somewhere in the range of $0 for the first few months, then add a figure such that she's paying about 1/4 what she's saving by not refinancing for the next year, than 1/2 then 3/4 then 1, then 1.25 and so on. (So if her payment would go up by $400 by refinancing, it would be $100 for the first year, $200 for the second, and so on).

You might also want to consider some sort of escrow account that is structured in a way that neither of you could withdraw money from it and which has a couple months of house payment in it. She'd make her payments to this account and The autopay on the loan would come from this account. You could monitor it to make sure a payment is not missed and if it is, it gives you a month or two to fix before a payment is missed.

One thing she needs to be aware of is that I don't know anyone who expects interest rates to go down in the near future. The fed continues to raise them fairly aggressively to try to get inflation under control. No one knows for sure but it wouldn't surprise me if the rates don't get lower than they are right now for at least a couple if not a few years.