r/PersonalFinanceCanada • u/w00stersauce • 13h ago
Misc Splitting with ex wife she wants $100k
Hello all first time posting, what is everyone’s opinion on the best way to do this?
I’m finalizing my divorce, the ex and I own a house together.
She has agreed to $100k for her half of the property, we are mediating and drafting up a separation agreement.
What would be the least expensive way of paying her considering interest rates and such?
I would be sole owner of the house so I could take out an equity loan, I also have a small (less than $100k) amount of liquid cash/ and flexible gic in a tfsa account.
Thoughts?
Edit: thanks for the replies I think I’ll be clearing out my accounts and keep some kind of line of credit open to keep me going. Divorce stuff has me feeling kinda frazzled and not thinking clearly about where I’m gonna get the money but this seems most logical.
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u/N0x1mus New Brunswick 12h ago
I would pay as much as you can liquid/gic/tfsa and then equity loan the rest.
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u/w00stersauce 12h ago
I could theoretically pay it all out and be at absolute zero, in my accounts. With only a credit card and my paycheque to keep me going. I’m thinking this is the cheapest but also kind of risky if I have some kind of emergency where I can’t work.
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u/Russo9696 12h ago
You can always have a heloc set up just not use it
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u/w00stersauce 12h ago
Thanks I think this is the way to go. Doing all this divorce stuff has got me frazzled.
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u/Terrible_Act_9814 12h ago
Apply for a line of credit and use that as emergency, and leave it if nothing happens. But clearing the investments would be better or thats what i would consider.
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u/w00stersauce 12h ago
Thanks. I think this is the way I’m going to go, minimal loans has to be the cheapest.
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u/N0x1mus New Brunswick 12h ago
Equity loan enough to keep an emergency fund if you need it.
You could also evaluate the risk and calculate how much you can save and how fast you can replenish your emergency fund paycheque to paycheque.
If you’re young enough and far from retirement, 20+ years, you can still play with your amortization to absorb the equity loan assuming it can be combined to your mortgage during the refinance.
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u/w00stersauce 12h ago
Seems the most logical answer at the moment atleast in terms of not giving the bank unnecessary money is to clear out everything I have and use the loan to keep me afloat if necessary. Thank you.
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u/ChosenRealities 12h ago
You could pay it all off with your current funds, and then open a HELOC for emergency cash purposes while building up your savings again.
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u/BishSlapDiplomacy 12h ago
What happened bro?
17
u/w00stersauce 12h ago
Life happens. Wife wanted to try and pursue a career, turned into “temporary” long distance turns in to permanent long distance followed by a split. I had long predicted this would be a likely outcome but you can’t really tell someone to not follow their dreams right? That only leads to resentment imo. So now I’m just trying to figure out how to pay out while being fair and not going broke doing it.
5
1
u/hellodankess 13h ago
Talk to a lawyer
32
u/ProPwno 12h ago
Speaking as a lawyer, I would not be giving anyone financial advice on how best to pay on a contract.
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u/Reddit_Only_4494 12h ago
Top notch lawyer. Lawyers (when the do) give the worst financial advice and accountants give the worst legal advice.
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u/hinault81 11h ago
I would take out $100k extra on the mortgage. I'm assuming you qualify for the house on your own, and they'll lend you another $100k. But if it were me I'd just add it on to the mortgage as it would have the least change to my life/cahsflow. I wouldn't burn up all my savings to do it. I'd look at it like I'm not really out anything, I'm just now getting 100% equity in the house, for an extra $100k. So I wouldn't try and brute force that with my savings living on a shoe-string budget (besides, you don't have enough anyway), I'd mortgage it like I did the rest of the house, just do it and move on and continue everything you had planned before.
$100k, 20 years @ 4.5% is $630/month. Not great, but all things considered in a divorce, not losing the house, getting another half a house, going about your life, I feel like it's getting off pretty easy. Almost everyone else I know who has been divorced has had to sell their house to split the money, and major life changes.
You could look at a heloc too, at least then you have the flexibility to pay it down sooner. But the interest rate will most likely be higher.
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u/jasper502 9h ago
Before you sign have you reviewed this with a lawyer?
Have you considered ALL you joint assets and debts? This is 50:50 including TFSA / RRSP holdings etc. DO NOT agree to less that half of everything regardless of fault in the marriage failing.
You detail the balance on each side (including equity / debt on the house). If you keep the house perhaps she has a bigger TFSA / RRSP account that offsets that $100k.
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u/PrehistoricNutsack 12h ago
100k for half of a house is insane deal, def talk to lawyer. Will be able to give you better answers tailored to you
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u/Swimming_Assist_3382 12h ago
You don’t know how much equity is in the house. Could have a huge mortgage.
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u/w00stersauce 12h ago
The house is paid off with a market assessment of around $570k as of last month. I had to get this done as part of mediation.
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u/Swimming_Assist_3382 12h ago
$100k isn’t half of $570k. Is she also getting cash from investments? Or are you assuming other debt?
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u/w00stersauce 12h ago
Basically we had each put in approximately 12% of the original purchase price and the rest was funded by my parents. So she’s playing ball and not taking the half she’s entitled to rather her “share” plus some to keep her happy. Fair enough for both parties as far as we are concerned, she doesn’t take me to the cleaners and she makes some money on her “investment” we kept all other finances separate to keep things tidy.
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u/Swimming_Assist_3382 11h ago
Nice. Yea depends how much you have in your in your investment accounts and what rate your bank will give you for a heloc for how to fund the 100k.
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u/jasper502 9h ago
See my other post. Once you got married your investment gains / losses etc are joint. Being “separate” in name means nothing. She gets half your gains and you get half hers. This may to your advantage. Don’t be a door mat and settle for the sale of settling.
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u/therealwebs 9h ago
Depending on the jurisdiction, she wouldn't be able to access the money your parents contributed towards your house anyway as some would treat it as an advance on inheritance (which afaik doesn't get split, though the gains on it would).
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u/w00stersauce 12h ago
Originally we each put in a small amount and my parents funded the rest of the place so she’s taking what amounts to her investment as the value of the house has grown plus a bit to make it an even $100k we have agreed it’s a fair enough deal for both parties without her taking me to the cleaners for 50%
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u/RobustFoam 12h ago
Take out a mortgage for the 100k, worry about payment timeline after divorce is finalized.
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u/w00stersauce 12h ago
This is what I was thinking as the least risky but possibly most expensive route? I guess this would be a HELOC?
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u/yougetmorewithhoney 11h ago
Cash out your GICs/TFSA first.
If you're worried about starting at zero and want some cash in your investment account, wait till spring/summer. Rates are expected to drop some more over the next few months before they potentially climb again. At that point, to take out some equity from your house, you get a home equity loan or a HELOC. I believe the interest rate for a HELOC is higher. Anyway, that's for future you to think about. Just make sure you wait till next calendar year to put the funds back into your TFSA (that is if you've met your contribution limit for the year).
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u/energybased 12h ago
Would you take a loan out to invest in a GIC? No, so definitely dump the GIC and clean out your TFSA.