Divorce, mortgage refinance

[Carmenrevelle]

Hello all,

I am in a tough spot, I need to refinance my mortgage to remove my husband from the loan. Of course, this comes at a time where my credit score is 545. I was approved for a refinance loan through New Funding with a 6% interest rate, but the payments are too high, which I realize will happen with my low credit score. Are there any other lenders I can try? I need to be able to pay my husband his portion of equity. 

[ShanetheMortgageMan]

6% is a great rate, even for high credit scores.  You can buy the rate down if you pay points, did you ask your loan officer about that option?

[Carmenrevelle]

Thank you, I didn't. I will reach out. My payments would be $2400 vs $1800 and with a single income, it will be hard to swing. 

[FlaDude]

As Shane mentioned, 6% seems pretty good right now, so it doesn't appear your current scores are really causing the problem.

In case it isn't clear, paying down your interest rate with points means paying additional money up front at closing, do you have money available for that?

It's not clear what your 2400 vs 1800 comparision refers to, but if 1800 is what your current payment is and 2400 is the new payment, I see a a few possible reasons. Is the new mortgage for a shorter term? For example if the existing is 30 years and the new one 15, that would cause higher payments. If so, see if you can get a 30 year loan. It's also possible that due to appreciation, the new mortgage balance is higher than the old because you also need cash out to buy out your STB ex. Finally, if your current mortgage is at a super low interest rate, you won't be able to replicate that no matter what your score is. Your scores could be 850 and you are not going to get a much better rate than you have been quoted, certainly not 2.5 or 3% if that's where you are now.

Maybe you've considered this already, but you might need to rent a room or come up with more income somehow to do the buy out.

[Carmenrevelle]

Thank you for responding. My current interest rate is 3.125%, so I'm very fortunate for the 6%. I did call about buying down rate, but they would use the money from the cash out towards that, which I would not be able to use since I owe that money to my husband. As good as it all sounds, I don't think I can swing the new payment and may have to be the one leaving the home instead of my husband. 

[ShanetheMortgageMan]

Is selling the home to get the equity out of it an option?  Or are you really trying to hold onto the home (for the kid's sake or some other reason)?

In situations like these, where you have a really low 1st mortgage interest rate, we usually recommend a 2nd mortgage of some sort to access the equity.  However, with 540'ish scores it's going to be near impossible to find a lender willing to give you a 2nd mortgage.  My question though is there enough time for you to get your credit scores up and then get a 2nd mortgage to pay off your ex-husband?  There are 2nd mortgage programs that will go down to a 640 score.

[Carmenrevelle]

There really isn't a rush, but my husband changes his mind daily. So, I would like to make things happen sooner than later. I would like to keep the home for the kids sake and comfort. My husband doesn't work in town so he is not really here to take care of them home. 

[ShanetheMortgageMan]

Is there a deadline you must pay him out by?

I'm not an attorney, but if there isn't a deadline, then you might want to keep your head low, work on the credit scores, and aim for being able to qualify for a 2nd mortgage down the road.  Then if he starts applying pressure, offer to formulate a timeline on when you'd pay him out by.  

[Carmenrevelle]

No deadline as of now. I have contacted a lawyer to hopefully start an agreement process vs having to fully separate for a year. My husband asked if I could make things happen a little sooner so he can move out quicker. 

[KatzNDawgs]

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@Carmenrevelle wrote:

No deadline as of now. I have contacted a lawyer to hopefully start an agreement process vs having to fully separate for a year. My husband asked if I could make things happen a little sooner so he can move out quicker. 

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I had a similar situation, my spouse was able to move out and find own place fine even though name was still on mortgage and title, but I just covered mortgage payments until we got legal divorce decree that spelled out I would get mortgage in own name (and also full rights on title, no paying spouse as they were at-fault). This went on for a couple of years before official divorce occured. Since we were both veterans though, I just did an assumption of the VA loan keeping original APR and getting name on mortgage and title solely in my name. Decree also stipulated time frame for that to occur, so I'm not sure how amicable your husband would be to do a similar arrangement until your scores get to a better range.