Mortgage/House Division

[aurias]

Kentucky

I have a rather unique case I suppose. My wife/ex decided to go through a self-help packet to process our divorce, since we get along well enough to do so. We've managed everything, but I'm a little hung up on what to do with the house. I have children from my marriage before her, so I stayed in the home we'd bought together. We lived in that home for exactly 1 year prior to her moving out (May 2016 to May 2017 is when she resided there). Normally, I know it's a good option to sell the home and split the profit, however, I didn't want to drag the kids through more than they had to be dragged through. That, and since we were 1 year in, there was likely no profit to be had from selling anyway.

She went ahead and signed a quit claim deed, and she was never on the mortgage/loan at all. I'm wanting to make sure she gets her fair share though, so I'm trying to decide what to do. We paid a 3.5% down payment on the home (FHA), plus a few thousand in closing costs, price of inspection, appraisal, etc. It totaled about $12K I think. I've played with a couple options:

- She gets 3% of the home value when I eventually sell it, regardless of when that is, or, on my next appraisal I simply pay her that out of pocket. I get the 3% number from the total amount we used from savings to get into the home, and principle paid for that first year in the house, totaled together, taken as a percentage of the home value when we bought it (which is about 6%) and then dividing that in half

- Alternatively, I've considered just giving her half of the $12K, plus half of the principle paid in that 1 year, when the house sells, plus some interest amount that's added on top of that. In other words if I were to pay her today, I'd pay $6K + 50% of principle balance 1 year in. But if I wait until the house sells some day (could be years) I need to take on some additional interest on that amount to make up for time. In other words it's akin to me having a loan out from her

Any thoughts on how we can handle this? I want to be as fair to her as possible. I have no intentions of screwing her out of her part in something she helped buy.

Thanks in advance!

 

[FlyingRon]

Neither of your options sounds like something that is equitable to the two of you.

Appraise the house now (ideally as close to the divorce settlement date as possible). The house value is a marital asset and the outstanding loan is a marital debt. The net equity is split between you or the net debt if you're upside down. In your state, you MIGHT get some adjustment for money you exclusively paid after she left the house, but that's likely to be a point of argument. If there is $20,000, in equity. Settle it for $10,000. If you don't have the money to pay that, you can generally make it contingent on some other event (such as the house being sold), etc...

 

[adjusterjack]

Any thoughts on how we can handle this? I want to be as fair to her as possible. I have no intentions of screwing her out of her part in something she helped buy.

My advice: Hand her a check for $6K now, "Here's half of what we put in the house" and be done with it. That's plenty fair. Don't even talk about it, just do it. It's the talking that makes for the trouble. Don't tie yourself to promises for the future. They could end up being very costly. If she wants more, she'll tell you, then you can reach an agreement you can both live with.

 

[LdiJ]

My advice: Hand her a check for $6K now, "Here's half of what we put in the house" and be done with it. That's plenty fair. Don't even talk about it, just do it. It's the talking that makes for the trouble. Don't tie yourself to promises for the future. They could end up being very costly. If she wants more, she'll tell you, then you can reach an agreement you can both live with.

I agree with the notion of giving her something now and being done with it. Either get the house appraised and give her half of the equity, or give her half of what the two of you put into it. Unless there are other assets to divide the main thing is that you want to be sure that she can pay first, last, and security deposit plus necessaries on a new place to live. That is the main thing that will get this whole thing over and done with the least amount of fuss.