- November 10, 2023
- Posted by: legaleseblogger
- Category: Related News
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Financial Overview
Gross Income: $90,000
Net Income: $5000 per month
Savings:
– Total Savings: $10,000
– Certificate at 4.9%: $5,000
Debts and Expenses:
– Current Mortgage: $2300 (with $490k left)
– Utilities: $800
– Car Insurance: $132
– Car Payment: $500 (with $30k left)
– Credit Card Balance: $1300
– Student Loans: $38,000
Additional Financial Assets:
– Settlement from Divorce: $25,000
– Retirement Accounts: $9500 and $8500
– Rental Income: $1200 per month
Financial Concerns and Decision Making
As I navigate through the divorce process and take on the responsibility of keeping the home, I am faced with the need to refinance soon in order to remove my ex-spouse’s name from the mortgage. With a settlement of $25,000 and existing retirement accounts, I am seeking advice on how best to manage my finances during this challenging time.
With limited support and the overwhelming task of making significant financial decisions, I find myself feeling anxious and uncertain about the future. It is essential for me to weigh my options carefully and seek guidance to ensure financial stability and security for myself.
AI Legalese Decoder’s Assistance
In this situation, AI Legalese Decoder can be an invaluable tool for understanding the legal implications of the divorce settlement and the refinancing process. It can provide clarity on the steps involved in removing the ex-spouse’s name from the mortgage and offer insights into the potential impact on my financial situation.
Additionally, AI Legalese Decoder can help in exploring the best course of action regarding the withdrawal of funds from the retirement accounts. It can provide information on the tax implications, potential penalties, and alternative options for utilizing these funds to address outstanding debts and enhance savings.
Furthermore, AI Legalese Decoder can offer guidance on the legal and financial considerations of renting out a room in my home, including any contractual obligations and potential impact on my overall financial situation.
By leveraging the capabilities of AI Legalese Decoder, I can gain a deeper understanding of the legal and financial aspects of my situation and make informed decisions to achieve financial stability and peace of mind.
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Original Content:
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Revised Content:
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****** just grabbed a
OK so before you make any decisions, you say you’re paying $2300 now for the current mortgage. What is the rate? Because if it’s sub 4% you’re going to be paying closer to $3200 a month if not more when you refinance. How can you possibly afford that on a 90k salary?
Check to see if your mortgage is assumable. My SO went through a divorce and instead of refinancing she assumed the mortage in order to keep the current rate.
do not pull out of retirement accounts. If they’re traditional 401ks or 403bs or IRAs, then what you pull out will be added to your taxable income ***and*** you’ll be assessed a 10% penalty to boot.
15k in savings but mortgage is almost half of net income. Does the 5k / month income include the 1200 in rent coming in?
I think if you can cut expenses to where you’re ***adding*** to savings every month…even if just a little, you’ll be okay. Particularly if you have the option to stop adding to retirement for a short period of time to goose saving.
I’d rather see you pause on retirement contributions than pulling money out.
What will the mortgage be after you refinance? You could be looking at a $1000 jump in your mortgage if you bought when rates were low.
A $490k home loan (at 7-8%) on $90k income in addition to student loans and a high car note seems very difficult, borderline impossible. My household makes $200k with no debt and we couldnÔÇÖt afford that.
Edit: looks like it comes to approx $3,400/mo *not including property tax or insurance.* With those included, youÔÇÖre likely looking at at least $4,000/mo.
ThatÔÇÖs an absurdly high house payment at your income and is likely going to greatly impact your ability to save.
Another thing to consider that youÔÇÖll need to pay 2-5% of the loan amount for closing costs.
What is the rate on your mortgage? Your payment could change ***drastically*** if you refinance now.
No! Leave the retirement accounts alone!
>I am going through divorce and will be keeping the home
Are you sure you want to do that?
​
>IÔÇÖll also be getting $25k from the settlement.
>
>I was thinking I could just withdraw the amount from the 2 retirement accounts and use it to pay off some stuff or maybe put it in HYSA?
It doesn’t make any sense to take money out of your retirement accounts. Use the $25k instead.
​
>I just want to build some sort of savings where I feel like I have a safety net.
Decrease expenses. Increase income. Live beneath your means. Creating an adequate safety net will take time if you keep the house.
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What age are you? Your retirement is already very low. I definitely wouldnÔÇÖt dip in that.
I don’t think you can really budget without knowing what your new mortgage payment will be.
You have absolutely no business keeping this home that you owe nearly $500k on making only $5k/mo. Trying to ÔÇ£keep the houseÔÇØ is a mistake that too many people make (especially women). Get out asap and use whatever equity you have to buy/rent a more manageable house or apartment.
Is the 25K coming as cash or in some other form. It may be awhile before you get it. Do you have children? Do you need that much house? Don’t forget property tax, too.
With your income plus the rent coming in, I think you’re in better shape than you think.
If you have children, is there any support you’re getting or having to pay?
Hopefully the car is your loan and in your name?
I would pay off the credit card ASAP, keep the 10K savings as an emergency fund , is that certificate at 5K coming due soon? Put both of those in a HYSA? Of course keep paying minimum for now on the student loan, once you get through this transition you can really work on paying that down.
My advice: don’t try to do everything at once. Breathe. One thing at a time and you’ll get through this. I divorced four years ago and the first two years financially-wise were tough–I had a few unexpected expenses and no cushion and had to put stuff on credit card– but things all settled eventually and now I’m out of debt and in good shape. You will recover.
Good luck.
I don’t see what the problem is? Your fixed monthly expenses are
$2300+$800+$132+$500=$3732
Your net income monthly is
$5000+$1200 = $6200
$6200 – $3732 = $2468.
That is plenty per month to live on and pay down your debts and save money. With the 25k from the settlement you could just pay down you high interest debt almost immediately.
Are you asking what investment vehicle to use? It’s pretty well documented what the order of operations is.
There has to be an option to just take your ex’s name off the title/deed of the house without refinancing your mortgage.
Apply for student loan pause due to circumstance if you can, but donÔÇÖt take from retirement.
$2300 mortgage and renting for $1200? So only paying $1100? ThatÔÇÖs doable with your income.
https://www.reddit.com/r/personalfinance/wiki/commontopics
Not sure of the length of time married or if you’re in a community property state. But If the divorce will be uncontested, it is best to generate where the assets could divide before the attorneys get involved. Hopefully, the mortgage can be refinanced to update the single owner name but this could increase your mortgage payment. Call a divorce attorney for a consult.
You canÔÇÖt afford the house and you clearly donÔÇÖt need that much space because you are renting out rooms. Living with roommates will be miserable. And, you have to hope they pay every month because you canÔÇÖt really afford to cover them. If they stop paying, the eviction process is not fun. If you want to house hack or be a landlord, buy a two-family you can afford.
If you sell now you both bare the expense. If you realize a year from now that this was a mistake, you will absorb all costs to sell. You donÔÇÖt say how much the house is worth, but letÔÇÖs say it $600,000. With realtor fees, closing costs, etc. youÔÇÖre easily at $50,000 to get rid of it.
Try and do a loan assumption for your mortgage. ItÔÇÖs been a few years but when my SO and I split he ended up being able to assume the loan on the same terms. I believe he had to pay at the time (about 8 years ago) $1k re-titling fee but given current interest rates definitely
The better way to go if possible.
OP, I hope the reason for wanting to keep the house isn’t a “keeping up with the Jones” mindset because you do not want to keep that house on that budget, it is near impossible to afford it. I was looking to see if maybe you had kids and that was a reason but with 2 roommates I’m assuming it’s a divorce without children. Sometimes a restart is the correct answer. That fear you have is legit because you will burn through your income quick with nothing left.
A few things that have already been listed:
Check if you can assume the loan, that should be possible with a divorce.
Roommates will help, but that’s you putting your financial guide in others
Do not touch your retirement
You are 29, a lot of life ahead, id advice you rent an apartment or condo in your budget and can get yourself in a healthy financial situation.
Contrary to everyone else posting, I don’t think you need to sell the home with a renter paying over 50% of your mortgage. Your net monthly housing is only $1100 and that’s as good a deal as any rental – and you have more space and more say and will continue building equity. Don’t sell the home as long as you can keep a renter.
IÔÇÖd sell the house. You canÔÇÖt go from two incomes to one, and maintain the same overhead. You will wreck your long term security for short term satisfaction. I faced this same issue in late 80s when I was a young guy and she walked out leaving me to deal with it. I moved to an apartment complex full of other young professionals like me. I needed to be there, not in my old neighborhood full of young married couples. Houses can be be bought again when you are better equipped to pay and maintain them.
Realistically keeping the house is going to have a *very* narrow path. As others mentioned, the mortgage (just Principal/Interest) is going to be about $3,300 if you refinance today. Higher if you have to tap into equity to pay off your ex.
At $7,500 gross monthly, that would already be right at the ~45% Debt-to-Income ratio most lenders refuse to loan over. If the rental income is formalized it should help offset as additional income, but when you add back in the CC, student loan and car debt it’s probably going to be close.
I wouldn’t empty retirement accounts to pay the debts.
I would look into what your 3rd bedroom can rent for, if that’s an option. I’d also look into getting out from that $500 car payment – how much is that car worth vs how much was borrowed? Even if you can’t get what you owe, if you can get enough paid off that you can roll the remainder into a smaller car loan or pay off with your settlement, that might be worthwhile.
No matter what I think it’s worth recognizing that this is all going to add a financial struggle to your life. You’ll be forced into a number of financial decisions on what you can afford to spend, the need to pick up side hustles, etc.
I think you need to give a very serious consideration for what’s motivating you to save the house vs selling and moving on, and what a full budget looks like both in this house and with it sold.