Buying a Home After a Divorce
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Every now and then I get approached (via the Contact Me form) by a writer who hopes to publish a guest post on my website.
A lot of times it does not progress any further than that as the topics they wish to write about do not mesh with my philosophy.
Every now and then, however, I find a true diamond in the rough and the topic proposed truly speaks to me.
The following submission by Sasha Belopoljanski [Disclaimer: We have no financial relationship] was one such case and I am happy to share it with you.
Buying a Home After a Divorce – How to Achieve FIRE from the Ashes of Your Married Life
As I was gathering the little shattered pieces of my life after my horrendous wouldn’t-wish-it-on-your-worst enemy divorce, I realized an important detail: I didn’t have anywhere to live.
You see, during our separation and divorce proceedings, I jumped from annoying my buddies’ wives by sleeping on their couches or spare rooms, sending my parents back down memory lane by clearing their gym and converting it back to being my high school room, to sampling every AirBnB in the city.
Once reality kicked in and the divorce was finalized (RIP my beating heart), I needed to figure out how to get back on the property ladder.
A little background on my personal story:
I was married for just over 5 years, no kids, and late-twenties when the divorce went through.
As a fervent (yet recent) follower of the FIRE (Financial Independence/Retire Early) mantra, divorce was a true kick in the teeth financially.
The average divorce isn’t cheap.
In the United States (where I’m based), the average lies somewhere between $15,000 and $30,000.
And most of this figure goes to paying pesky lawyers.
For me, I paid in the mid $20s.
To be fair to my ex-wife, she was generally fair in the distribution of assets.
The legal process was relatively smooth, all things considered.
For that, I’m still thankful to her (I’m going to refrain from commenting on the personal circumstances of our separation, but let’s just say there’s a lot of hate still there, ha!).
Of course, this dollar hit didn’t matter initially.
I was too torn up to properly think through the financial repercussions of divorce.
I just wanted it through as painlessly as possible (hint: don’t do this).
Overall, I’m pretty sure my FIRE journey took a six-figure journey into the past.
So I came to a crossroads:
Do I frivolously spend my way out of my post-divorce doldrums or do I bite the bullet and fight my way to financial independence?
I’m glad to say I picked option B.
For me, it was very important to move into a home I owned.
I’m not saying that it’s always the best decision (though I would still argue it is, if you can make it happen), but for my ideal financial configuration, ownership is the ideal.
Time to breathe.
I knew that post-divorce I found myself in a slightly emotional frame of mind.
While I was pretty sure that my FIRE head was still in full operation, I still decided to take 6 months off before deciding anything.
I needed time to decompress (Seinfeld reference, anyone?).
I picked a decent condo with a pool (hey, I deserved a little R&R after that emotional rollercoaster!) and started working on the finer details.
Getting the paperwork together.
If you’re buying a house post-divorce, you need to have your paperwork in order.
Have your final divorce decree alongside any legal agreements.
I was paying alimony, so I also had to factor that into my debt-to-income ratio calculations.
I was also aware that a divorce can sometimes have a nasty effect on your credit – though not through the actual divorce process, let that be clear – so I made sure my profile was spic and span first.
This mainly involved getting rid of every single joint account we ever had: it turns out we had quite a few (some I’d completely forgotten about!).
My wife was also spending a little too much on martinis and sometimes ‘forgot’ to pay her credit card bill on time, conveniently on an account that was also in my name.
The path to ownership.
So how do I get from not having an official place to live to being given the keys to my new, albeit smaller and simpler, property?
The first decision that I made was to go small.
Our joint property, which we still had a mortgage on (we sold it and split the assets), was beyond what I’d wanted to spend.
Sure, we could technically afford it on our salaries, but it’s still a mortgage.
My wife bought into the whole FIRE idea, but didn’t want to skimp on the ‘essentials’: the house and car still had to be decent.
Now that I was the sole captain remaining on the ship, I changed course.
And this took a little bit of mental/emotional gymnastics.
I realized just how much of an effect our joint financial decisions had made on my ability to make my own decisions.
It took me a while to reconfigure just how I felt money should be spent.
Once I’d re-calibrated my financial brain, I decided I wanted to go for something well below my means, something I could easily pay off in less than a decade (ideally far quicker).
I obviously still needed to get myself a decent loan.
The main thing I was looking for was the ability to overpay on my mortgage without incurring a penalty.
Not stretching my budget was by far the best decision I ever made.
Sure, my house wasn’t the envy of the Joneses, nor was my car the most impressive vehicle when taking out dates.
But I was hell-bent on hitting destination ‘financial independence’ as soon as possible.
My financial situation was solid in terms of salary (I was making around $120k per year after taxes), but the overall picture was a little iffy.
I wasn’t exactly sure how much I’d be able to pay per month, so I wanted to go for your standard 25-year mortgage.
All I was sure of was that I wanted to go all out in killing my debt as quickly as possible.
The (rough) calculations.
My aim was to spend 70% of my income attacking my mortgage, no excuses.
That’s just over $80k per year, $6.6k per month.
Ideally, I wanted to pay off my mortgage in around 5 years.
This was a couple of years ago, but this is the rough picture:
Property price: $400,000
Loan term: 25 years
Interest rate: 4.5%
Monthly repayments: $2,223
Accelerated payment: $6,623
Yes, I paid over $4,500 extra per month on average.
I admit, I didn’t quite hit my aim to pay off my mortgage within 5 years.
And considering I got a few raises along the way, I really should have managed to do it.
Nevertheless, I am quite proud of what I managed to do.
In total, I saved over $200,000 in interest by doing this.
I also shaved off about 19 years of mortgage payments.
Yes, I had to give up on Starbucks and expensive lunches.
I also didn’t buy the fanciest car and generally lived below my means.
But for the financial freedom, the lack of worry, the knowledge that I’d own every single brick of that house [or every blade of grass] in just a few years, it was more than worth it.
My wife’s current financial situation proves my point: she’s currently re-married (it happened within two years of our divorce and no, I’m not bitter…much) and their joint income far exceeds what I bring in.
Nevertheless, I know for a fact that they’re struggling to pay off the mortgage on their massive house.
And I’m sure driving those two expensive cars (including a completely unnecessary 4×4) doesn’t help.
Divorce is not an easy situation and, most of the time, it comes suddenly (ok, some of my friends were able to see what’s behind the corner, but for me – it was a thunder from clear sky).
However, after sudden shock, it was very important to maintain the whole FIRE idea.
And, like you’ve seen, I succeeded.
So, I wish you a good marriage and happy family, but if you find yourself in similar situation, I hope that my experience could be helpful to put some broken parts of your life together and move forward.
Sasha Belopoljanski is a writer who discovered his passion in providing creative solutions for building brands online. Following this passion, he continues to deliver awesome content through various niches.
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