Advice on refinancing mortgage

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Topic Author
anakinvader
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Joined: Mon May 18, 2020 5:47 pm

Advice on refinancing mortgage

Post by anakinvader » Mon May 18, 2020 7:25 pm

I know there’s a mega thread about refi but this isn’t exactly a simple thing. Very long story very short, very rocky marriage is most likely going to end in divorce. House was refinanced 5 years ago for a lower interest rate that is currently 4.5%. In both our names and it’s about 2200/month with about 280,000 left. I make about 85,000/year. Also have a personal loan in both names that will be paid in 4 years ($1500/month).

So, I know there’s no telling what might happen and what the outcome of a divorce will be (no kids, just the mortgage and personal loan). Would it be smart or stupid to refi the mortgage in just my name? I’m not sure I’d be able to manage making payments with just my salary but the alternative is selling our house and me having to find another place to live. I want to stay in this current house, Partner does not.

Legal issues aside, financially what would you do i this situation?
Also, if more info is needed obviously let me know.

mortfree
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Re: Advice on refinancing mortgage

Post by mortfree » Mon May 18, 2020 7:38 pm

If you are both in the mortgage for refi and then divorce chances are you will need to refinance to get just your name on it.

I am not a lawyer or a real estate mortgage officer. I just read the fine print of my current refi.

bluebolt
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Re: Advice on refinancing mortgage

Post by bluebolt » Mon May 18, 2020 7:44 pm

It seems like you can't afford that house plus the personal loan on your solo salary. I would sell the house and move to a place you can afford.

Topic Author
anakinvader
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Joined: Mon May 18, 2020 5:47 pm

Re: Advice on refinancing mortgage

Post by anakinvader » Mon May 18, 2020 7:58 pm

That’s kind of what I’m asking, is it better to refinance the current mortgage or start from scratch with a brand new mortgage?

Alternative question is how do I figure out how much I can afford on my salary alone?

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BrandonBogle
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Re: Advice on refinancing mortgage

Post by BrandonBogle » Mon May 18, 2020 8:04 pm

anakinvader wrote:
Mon May 18, 2020 7:58 pm
That’s kind of what I’m asking, is it better to refinance the current mortgage or start from scratch with a brand new mortgage?
A refinance is a brand new mortgage. The difference is where the money from the new mortgage goes -- to someone's pocket (the seller), to a bank (refi w/o cash out), or yours (refi w/ cash out). If you feel "refinance the current mortgage" makes changes to the existing mortgage, then a refinance is not what you think it is. If you want to pursue using the existing mortgage but making changes to it, that is a modification. The specifics would be in your loan documents, but it is unlikely the lender would agree to a modification of removing one borrower. You would end up having to either refinance to a new mortgage or else the house. No easy decisions here sadly.

That said, one question is how the debt and assets will be split in the divorce. That personal loan is what seems to be killing your budget, but how things get split up could make a big difference in the qualifying for a new mortgage.

Topic Author
anakinvader
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Joined: Mon May 18, 2020 5:47 pm

Re: Advice on refinancing mortgage

Post by anakinvader » Wed May 20, 2020 4:41 pm

Sorry, I should have been more clear. I’m wondering if it would be better to refinance now in just my name before any divorce papers are signed. I know a refi is a new mortgage. We may not finalize anything for at least another year, maybe two and I don’t want to miss the low rates (maybe I already did)?

Second question, our personal loan is 10% interest, if I could refi for a lower than 4% rate would it make sense to roll that personal loan amount into the new mortgage?

Last question for now, how much change in interest rate makes it worth refi or not? Ours right now is 4.125%

Bcoleman7506
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Re: Advice on refinancing mortgage

Post by Bcoleman7506 » Wed May 20, 2020 11:54 pm

1. If you’re asking by putting the home in your name, you will be able to keep it in the divorce, no that’s not how it works. Unless you had a prenuptial agreement of some sort, if you bought it while you were married, that is “marital property” and it is half hers. Name on title doesn’t matter.

2. Depends on the term of your personal loan I guess. Most are short term - less than 5 years. Not always is a lower interest rate best especially if you take it from a short term loan (personal) and roll it into a long term loan (mortgage). It may be only at 4% now, but you may be paying on that same amount 25 years longer. In the long run, that loan will cost you a helluva lot more.

3. Good rule of thumb is 1% AND you plan to live there for 5 more years. There are calculators that tell you exactly when your break even point is because of closing costs. Then that decision is up to you.

I think you may be missing the problem here, though. You do not make enough money to live in a home that costs you $2.2k/mo especially with a 1.5k/mo personal loan. You need your wife’s income to supplement your mortgage/personal loan. If you think you’re going to go through a divorce in the next year or two, your finances don’t indicate you could afford to live in that home. In that case a refi would be an awful idea because you will have forked over thousands of dollars in closing costs, and never were able to use the lowered interest rate to recoup the upfront costs.

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