Hey Money Minder,
So, here’s the deal: I’m about to come into some money in California. My ex wants to sell our house for around a million bucks. The interest rate on the loan is 4.5% because it was a duplex, and we didn’t go for an fha loan. Once we pay off the loan, we’ll have 250-300k each. But, I have no clue about taxes, potential pitfalls, or even the best way to handle all this.
Oh, and did I mention I have bad credit? Just some federal student loans adding up to 60k. My earnings record for the past few years is pretty crappy too, mostly off the books (I’m a licensed general contractor who just got licensed 2 years ago).
Right now, I can manage a mortgage payment of around 2k. But, I’m lost. Should I avoid selling? Can I even get a decent home loan with a down payment of 250k to 300k? And what’s the deal with capital gains tax – can’t avoid it even if I use the money to buy a new house? And maybe I should keep the duplex and ask my parents to buy out my ex?
I know, it’s a lot of questions. But, help a confused soul out?
Cheers,
Dreaming of Stability
Response from THE MONEY MINDER:
Hello There,
I understand the overwhelming feeling that comes with facing financial decisions, especially in a situation like yours where a significant amount of money is involved. First and foremost, congratulations on the potential windfall from the sale of the house. It sounds like a great opportunity to put yourself in a more stable financial position.
Given your concerns about taxes, credit, and potential pitfalls, it’s essential to approach this situation with a clear and practical mindset. Selling the house and dividing the proceeds might be a good option, especially if continuing to own the duplex could lead to more financial strain. However, before making any decisions, it would be wise to consult with a financial advisor or tax professional who can provide personalized guidance based on your specific circumstances.
Regarding your credit and income situation, it’s admirable that you have been building your business as a licensed general contractor. Your recent licensing could work in your favor when applying for a home loan. While your bad credit and off-the-books income may pose challenges, having a substantial down payment can improve your chances of getting approved for a mortgage. Lenders may consider other factors aside from credit scores when assessing loan applications, such as your income stability and business growth potential.
As for capital gains tax and buying a new home with the proceeds, it’s true that selling a property can trigger capital gains tax implications. However, there are strategies and exemptions that you could explore to minimize the tax burden. Again, seeking advice from a tax professional can help you navigate this aspect effectively.
In the end, whether you sell the duplex, buy out your ex with your parents’ help, or explore other options, the key is to approach the situation strategically and with a clear plan in mind. Putting together a budget, assessing your financial goals, and seeking professional advice can help you make informed decisions and avoid potential pitfalls along the way.
Remember, financial decisions can be complex, but with the right guidance and a practical approach, you can navigate this situation successfully. Best of luck with your financial journey, and feel free to reach out if you need further assistance.
Farewell from THE MONEY MINDER
