I’ve decided to keep the house, at least for the time being. Selling at this point of the divorce process is just too much of a burden. My WW has already left and I would have to do the work to try and sell the house. I’m a little confused though on the quit claim and also refinancing. My WW has decided to give me the house without paying her any equity providing I don’t touch her 401K. It’s basically a wash. However, I’m a little concerned on refinancing as we have a 7 year arm at 4.75%. Does anyone have any suggestions or know of what it costs to refinance a home? I’m frustrated because I’m afraid the closing costs/refinancing will eat up the rest of my savings from the divorce. Currently my mortgage payments are around $650 a month and I really can’t afford to live here if they go up..

Timn420,

This is really straight forward. If your wife's name is on the mortgage, you must refinance anyway. Refinancing usually carries these fees:

1. Inspection and appraisal
2. Loan application fee
3. Origination fee (usually 1% of the principle amount)
4. Advanced payments into escrow (one year typically)
5. Attorney's fee for closing
6. Title search
7. Advanced interest (close as close to the end of the month as possiblew to minimize this expense)

Most lenders require 1 and 2 be paid up front with the loan application, but the rest generally can be rolled into the principle amount and financed. If the loan-to-value ratio exceeds 80%, you will also be required to carry private mortgage insurance (PMI) until the balance of the load falls below 80% of the value. It is required by law on Fannie Mae and Freddie Mac mortgage products. This can add a few hundred dollars to your monthly payment.

If you have money in your escrow account on your current mortgage, these will be refunded to you after the new mortgage pays off your old loan. You may even receive a small refund of interest and principle paid for the current month, depending on the timing of the transaction.

You say you have a seven year ARM. Do you mean that you have a seven year mortgage or that you have a seven year ballon loan that is amortized over 15 or 30 years? You can probably keep your payments about the same or maybe a bit less if you do not roll too much of the cost into the principle and don't take an equity cash-out. I personally don't recommend ARMs, but prefer fixed rates. They may run a half-point more, but ARMs carry 3-4% rate caps, and many people find themselves unable to absorb the cost when interest rates rise. And believe me, they are going to rise over the next few years. I also prefer 15 year notes to 30 year, since you build equity much faster, and spend much less on interest over the term.

The quit claim deed is a simple instrument that the closing attorney will handle for you as part of his closing service. Usually it is signed and executed at closing. This would mean that you wife will have to go to the closing, but usually the attorney will make the execution of the quit claim deed the first step in the process and send the ex packing. Sometimes they will use a courrier to deliever the quit claim to the ex, who will sign it in the presence of the courrier, who is a norary public.

[color:"blue"] Tim [/color] ,
Everything [color:"blue"] Check [/color] said is right on....however, if you purchased your home more recently, it's possible to have some of the fees associated with the original purchase waived and those original results applied to your re-finance. You'll need to advocate for it a little bit. Things like inspection and appraisal and title search will "be good" for a few years. Also, you can get loans without an origination fee (which I did). They are available at most lending institutions and online loan places too, but might tie into your credit rating.

Thanks everyone for your help! The house situation is really troubling for me. Refinance it or sell it now. With the divorce going right now, its hard to contemplate moving out the work it takes to get the house ready. I don't have kids, and have contemplated moving to another state to be with my brother or at least to another "hipper" part of town. Basically I would hate to spend the money to refinance, keep the house for a few months, and then sell. Decisions, decisions...

Here's another thought for you. If the house has appreciated since the mortgage was taken out - OR if you originally put down more $$ than required, you may be able to refinance now with some cash out. That could be used to pay closing costs, put $$ in the bank, etc.

Good idea! Something else to keep in mind. After talking with my parents they are pretty adament about going ahead with the refinancing, even if I stay there less then a year. We originally bought the house for 94k and have about 89k left on the loan. Other houses in our area are selling fairly quickly so I should be able to break even after closing closts etc.

"After talking with my parents they are pretty adament about going ahead with the refinancing, even if I stay there less then a year."

Whoa! No, no, no, no. If you aren't going to be in the house for at least four to seven years, you'd do better to sell it. If you refinance the house and then sell it in a year, you are going to loose a lot of money.

Maybe you want to make an appointment with a Certified Financial Advisor to discuss options before you burn yourself. Their fees are rather reasonable and they can save you a lot of trouble.

Post deleted by californiapoppy

We lived there for 3 years total. It looks like I need to get with a CFA to figure this out. A friend of mine who is a banker said that it may cost around 1800 to refinance if I stay with the same lender. That is refinancing for 90K. That wouldn't be too bad if it was true.

$1800 sounds about right for a $90K mortgage. I did a refi a couple of years ago for $190K and it ran right at $2900.

We we talk about the length of time you live there, we mean that you plan to live there after the refi. If you sell the house within one year, you will have wasted that $1800. In addiditon, if you take a cash-out to cover other expenses and then sell the house, you are essentially borrowing against existing equity at a rather high interest (not just the APR, owing to the effects of amortization), since with normal appreciation, you will not have time to rebuild that equity in less that 5-7 years -- even more time is required for a 30 mortgage.

Finances aren't the only reason to consider. Your uprooting and having to make decisions NOW may not be worth it in the end, even if it saves you money. Also, depending on where you are at with the D, being able to find the cleanest way out of that mess may also be worth considering.

Just some food for thought.

Finances are definitely not the only reason to consider.
If I sell, we will have to split 401k's and it will get messy.
If I keep the house things would be smoother. Also, since my WW is in another town selling would be all on me.

I'm talking with a CFA tomorrow so hopefully I can get this straighten out. Thanks for the answers, it will give me alot of ideas to run by the CFA!

Let me give you a different perspective. When I got divorced, my ex W kept the house and we did not refinance the house. There was some paper work that she had to sign that essentially said if she defaulted on the loan than I got the house and owed her nothing. I would still have to pay the mortgage company to get the loan back in good standing.

Also you said that the house was 94K and you owe 89K. Even if you try to sell it you will loose money because of the 6% realtor fees and 2% additional fees (~$7K). You may want to consider this because at this point your W would have to share in this cost. The value of the 401K now seems to be higher.

I did something very similar in my first D, dlw, since my ex couldn't qualify for a mortgage. I also made it a requirement that she keep a life insurance policy in the amount of the principle balance of the mortgage, with me listed as beneficiary. Proof of this was required annually until the mortgage was paid in full. I also required a last will and testiment, leaving the house to me and requiring survivorship of this clause until the mortgage was paid. Finally, she had to live alone (no live-in boyfriends -- d'oh!) in the house as her primary residence for at least two years. If she didn't ownership reverted to me. Only when all of these conditions were met was a quit claim deed executed. My ex didn't like this one bit, but I told her it was either do it my way or sell the house, absorbing ALL associated costs herself, and go live in an apartment somewhere.

What did you learn? Hopefully something useful. <img src="/ubbt/images/graemlins/grin.gif" alt="" />