Questions about buying first house after a divorce.

[renuck]

Quick history:
- I'm thinking about a divorce in a year and a bit.
- We own a home now (durham region).
- She makes more than I do
- I assume our daughter will stay with her most of the time so I'll be paying child support.
- I'm expecting it to be a pretty clean split if it matters.

I'm starting to follow real estate in my area and am getting an idea of what I can (or more appropriately should) afford to move into. I'm noisy and like space to do stuff so I'll need a detached home. I've read about the 20/28/36 rule, meaning 20% down, 28% of gross income on housing, and no more than 36% on total debt. I've seen it stated by both lenders and financial advisers as a guideline so they seem to agree but I'm wondering if it is a good guideline. I expect to be debt free (as in car, lines of credit, and credit cards) after the dust has settled. What I'm looking at for a house I'd put 25% down, mortgage + property taxes would be ~24% of gross income, and total debt (housing costs + (alimony to me - child support to her)) would come in about 30% of gross income. So it appears I'd be marginally ahead in all categories.

Is this realistic? or even a good scenario? I'd love to hear from you that have been through this and if there is anything I'm forgetting to consider.

Thanks

 

[Butler1000]

She makes more? Go for spousal support. You are entitled.

At the very least she needs to buy you out of the house. You are entitled to half the equity.

 

[renuck]

Maybe I'm using the wrong terms? I thought alimony was the same as spousal support, if I got it wrong that's what I meant anyway. The calculators I've used shows I will still pay a bit after factoring that in and the child support I would owe.

I expect all debts, assets, and equity would be split. This is what I'm basing my calculations on. Even if it worked out that she could pay me out and I keep the house I wouldn't. I thought about this scenario and taking a tenant to make use of the extra space but I don't think I want to get into that, I'd rather down size.

 

[yababy1]

Take some good advice, you expect clean split, she pays you, you her etc. Go talk to a good divorce attorney first. One thing I know after years of volunteering as a support worker for divorced and separated men, that what you think and what happens are often MILES apart

 

[richaceg]

Having a kid...it will be an even slate where only the kid benefits...it won't matter who earns more between the 2 of you. what you or her will pay for is for the child. Even split on the house. Get a good divorce lawyer.

 

[Jasmine Raine]

I know nothing about real estimate at the moment but I don't see why you could not just consult an agent or broker.

Getting info here on TERB may prove difficult considering these guys are all going on about divorce when you are asking about buying a house and mortgages. LOL

Who knows, maybe now they will get back on track. Either way, I would still consult outside of here.

 

[wiskey bravo]

Brewwguy,

Jessica is right. When talking about property and money leave if for the professionals and dont rely on google. Try not to spend too much time thinking about that since the bank will grant you the affordable amount based on their formula and stress testing. Book an appointment with a financial institution. It only takes 1 hour. The approval amount is for your protection along with theirs. If you get approved for a 600k mortgage, find a house for 500k. Leave some breathing room. Just my 0.02 cents. Good luck. Sorry to hear the marriage isn't working out.

 

[renuck]

Thanks Jess for trying to get the thread back on track! I certainly wouldn't use the advice here as my only source. However, I'm pretty sure there is a lot of members here that are divorced and must have had to go through finding a house after the fact unless they moved back in with their parents. I would think their experience on this, how they figured out what they could afford for a house, and how it worked out for them (good or bad) would be valuable information. The 20/28/36 rule is something that google turned up and is talked about a lot. Certainly people here must have a good idea of how close their situation was to this guideline when they were staring out after their divorce and how it worked out for them and if it really is a good rule of thumb.

I know there's a lot of unknowns in this. There are online calculators for spousal support and child support. I'm not sure either of us could fabricate much of an argument to deviate from those or justify not splitting all debts, equity, and investments 50/50. The numbers I'm playing with aren't really worst case but I'm far from using best case (as in even split) numbers too. I'm not going to trust the bank AT ALL to tell me what I can afford. Last few times we asked what we would qualify for mortgage wise we were given ridiculous numbers, I laughed when I saw them. Sure we could afford it on paper but we'd probably have to get used to a lot of Mr. Noodles and single ply TP. I have no interest in being house poor... which circles back to the original question.

 

[gack]

I would actually suggest talking to a 3rd party without a stake in your purchase. Real estate agents and brokers have an incentive for you to buy the biggest house you can afford. The bank financial advisor is also incentrd for you to get the biggest mortgage you can afford.

I assume most professionals are responsible and have your interests at heart, but at least subconsciously the best decision for you might not be the best decision for them.

If you speak to a 3rd party like an accountant or a fee-for-service advisor, you know that there is no incentive for them to steer you the wrong way. Even for piece of mind that should help.

 

[renuck]

Thanks for the advice of consulting professionals... A good friend is a real estate agent/broker, another acquaintance is a successful real estate lawyer, both have lots of connections. I have resources to draw on when the time comes. I wanted to hear form people who have actually lived it, what they did, and how it worked out for them.

 

[wiskey bravo]

Thanks Jess for trying to get the thread back on track! I certainly wouldn't use the advice here as my only source. However, I'm pretty sure there is a lot of members here that are divorced and must have had to go through finding a house after the fact unless they moved back in with their parents. I would think their experience on this, how they figured out what they could afford for a house, and how it worked out for them (good or bad) would be valuable information. The 20/28/36 rule is something that google turned up and is talked about a lot. Certainly people here must have a good idea of how close their situation was to this guideline when they were staring out after their divorce and how it worked out for them and if it really is a good rule of thumb.

I know there's a lot of unknowns in this. There are online calculators for spousal support and child support. I'm not sure either of us could fabricate much of an argument to deviate from those or justify not splitting all debts, equity, and investments 50/50. The numbers I'm playing with aren't really worst case but I'm far from using best case (as in even split) numbers too. I'm not going to trust the bank AT ALL to tell me what I can afford. Last few times we asked what we would qualify for mortgage wise we were given ridiculous numbers, I laughed when I saw them. Sure we could afford it on paper but we'd probably have to get used to a lot of Mr. Noodles and single ply TP. I have no interest in being house poor... which circles back to the original question.

You have no interest in the bank? Then where do you plan on getting your money from? Private funding? What the bank gives you is a suggested number, it doesn't mean you have to use all of it. Dont worry about trusting the bank since the bank doesn't trust you anymore. You'll have child support payments that will be factored into the mortgage equation which works against you in the process. The bank will stress test you at an interest rate of 4.5 percent. Dude I'v been through this road. Its not rocket science. You mentioned people must have a good idea? Every divorce is different so no one can answer your specific question. Some couples have kids, others dont. Also another variable how long the marriage lasted?. What incomes where made along the way? Who made more? If your wife is the bread winner the duration of time she's been making more money is also another piece of the equation a lawyer looks at. By how much? At one point the spread between my ex-wife and I was 20k, the lawyers didn't care too much about that. If she has a pension, you are entitled to it. If you have a pension she is entitled to it. The list can go on. Unless you didn't sign any paper work stating " I cant touch your investment and you cant touch mine " (written by a lawyer) everything gets split down the middle. Period. I inherited a lot of money and guess what? Half went to her. That's the way it goes. But honestly man go see a lawyer. Dont take my advise. See what you can do to protect yourself now to minimize the damage later. Dont know if you can. It might be too late. My truthful opinion, if you know your investments are getting split, cash in that money and buy yourself something in your name. Perhaps a cottage or a car. She`s going to take half of it anyways, so consume it yourself before she does.

( I`m writing this message in a non aggressive way man, therefore, if I sound harsh please forgive me )
(if you`re playing with google type the following in the search bar - equalization payments )

Good luck.

 

[wiskey bravo]

Lastly, I dont know how much money you make. Lets say its 100k a year. I think that's a net take home value of 5k a month-ish? Keep your mortgage at around 1000 - 1500.00 a month? (no idea what your down payment is) Plan for 200-300 a month for property tax (again I have no idea where you`re buying next). Cable, phone, internet, Gas, car payments, Car insurance, home insurance, food, electricity, gas, membership and the gym ect ect ect…..and Child support. A friend of mine child support payment is around 600.00 bucks a month I think?? Anyways work out those numbers to yourself and try leaving some money at the end. if you have 1000.00 bucks left over after all bills are paid - great. If you have 2000.00 - even better. You get my point. Like you mentioned, there`s a lot of unknow, which leads me to say there`s a lot of unknow about your circumstances. Family law is family law Its black and white. If you`re a billionaire then sure things can get complicated. You will have a straight forward case.

 

[Dougal Short]

Find a girlfriend with a house before you divorce.

 

[renuck]

Hey Whiskey, thanks a lot for that info. Most of it I have a good idea of, or more so I have a good idea of what's uncertain. Either way more info is better than none so thanks again.

The fact that you've been through this before certainly helps, and your last post gives some numbers to go by. Hope you don't mind I reverse engineer them a bit. $100k makes for some round numbers, that's ~$8300/mo. Using your highest values of a mortgage for $1500 and $300 in taxes that put's it at ~22% of gross income for housing costs. That's pretty close to the 24% I was figuring but getting away from the the 28% recommended. Down payment would be 20% at least to avoid CMHC though I'm probably aiming at least 25% down. Your info gives me a frame of reference anyway.

Thanks.

 

[mandrill]

She makes more? Go for spousal support. You are entitled.

At the very least she needs to buy you out of the house. You are entitled to half the equity.

I can only shake my head at your silly legal advice.

 

[curiousandlooking]

Have you considered renting until your separation is final and you have an agreement. I would invest in a family lawyer before buying a house mid-divorce. Is your wife aware of your intent to divorce? ... and yes a clean slip matters a lot. Wait until you guys start fighting over things and have to pay litigation lawyers at 300-500/hr. wrt to your real estate agent and lawyer friends... listen to them both but put your trust in the lawyer not the commission based sales person.

always remember, free advice is worth exactly what you paid for it.

Good luck. Hope yours isn't as messy as most are, emotions make people very ugly.

 

[renuck]

Have you considered renting until your separation is final and you have an agreement. I would invest in a family lawyer before buying a house mid-divorce. Is your wife aware of your intent to divorce?

Ok this isn't making any sense to me... First no she isn't aware yet that I'm thinking of divorcing but she drops hints now and then that I think she is thinking the same thing too. Regardless of that, I would have thought the sale of the house would be the final act in a divorce so the proceeds could be split to make each of us even. Apparently that isn't the case? Why would I buy a house mid divorce? or more importantly why would we sell the house mid divorce? That would leave both of us without a place to live without being able to buy another place to live. Again it doesn't make sense to me.

I have thought about putting my stuff in storage for a few months and renting a room if it works out that I don't find a place I like to buy by the time we sell the house or there is a gap on closing dates.

I do, however, disagree on your pessimistic view of free advice.

 

[the sun is shining]

Hi Brewwguy, Statistically the higher the eduction of your spouse the more likely you will be part of the one percent that makes it to trial. I was divorced in 2012 (trial) separated in 2008, still have barely enough to live. I have 1 child and lets say we both made 100,000.00 a year.
1) You need to ensure that you care for your child at least half the time. You need to ensure that you go for Joint Custody.
2) your access must be greater then 40% of the time. 50% of the time is what you should at least prepare for.
3) The reason for this is that you will have a better chance of an offset child support, spousal support is not usually that long if you qualify, Did your career take a hit due to taking time off to care for your child?
4) Between now and when you give your spouse notice either of you can rack up the debt which would have a great impact on equalization. Personal lines of credit, refinance your mortgage ect. If either of you have a small business the calculation becomes expensive if you have to hire a forensic accountant.
5) If either of you have a pension or RRSP's they will be in the calculation as well. However, if you cash them out now and show that you lost the money, they will not be in the calculation.
6) I once belonged to a mens divorce group and most men had to move in with their parents and could not afford rent let alone purchase. This is due to child support obligations. The child support table does not care what is fair or that the support payor has the money to live. It is based on your income and any other expenses the child has know as section 7 expenses.
8) I may be wise to by a 2nd home now so that you can use your spouses information to qualify for the mortgage that you think you could afford after separation. The truth is that if you have to use a lawyer the money you plan to spend on your home will be going to a lawyer. Lawyers generally love you to fight. I would recommend that you start to learn to self represent from the start because you will run out of money way before trial and be forced to rep yourself anyway. You need an understanding so that you can watch your money and be the driver of your case.
9) finally, statically- the person who files the application for divorce with the court is the one who is most successful if that is even a thing. The worst thing you could do is under estimate your spouse.

That is enough for now. If you want to talk PM me your number.