Should You Refinance Your Home or Get New Mortgage

by Thomas in Sonoma, CA and by Walter in Broomall, PA

Ask Kate if you should refinance your home or get a new mortgage: Thomas asks for his best approach to financing his new retirement home. Should he refi his condo and pay cash or get a new mortgage? Walter is refinancing his home, as required by his divorce decree. Meanwhile, his ex-wife added a 2nd mortgage. Was it legal for the bank to lien the home without Walter's signature?


Should I Get New Home Mortgage or Refinance My Condo

By Thomas in Sonoma, CA
Should I Get New Home Mortgage or Refinance My Condo

Hi Kate,

I have bought a property and am building my retirement home.

I have two mortgages, one a condo, the other a house. Together they are 320K (170K and 150K respectively). I have 3.5 percent 30 year fixed rates on both mortgages.

The existing home will be sold for a profit (I hope 100 to 150K) and will be put into the new home. I have a ton on equity in the condo (150K mortgage, worth 500K+). I want to keep the condo though.

How should I best approach putting the money together for the new house? I think I will need 350K. Get money out of the condo? Get a new mortgage and leave the condo mortgage alone?

I want the lowest payment and the best rate (of course). The new mortgage will need to be 200 to 250K.

Really appreciate it.

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Should I Get New Home Mortgage or Refinance My Condo

Hi Thomas,

Your approach to financing, in part, will depend on the occupancy status of both your retirement home and your condo.

Occupancy Status: Owner Occupied, Rental Property, Vacation Home

Are you moving into your newly built retirement home immediately and occupying it as your principal residence? If so, the new home will probably be your best source of affordable financing.

Another consideration is how much equity a lender will allow you to extract from the condo. Again, this will depend in part on the occupancy status. But make sure if you go through the cost of refinancing the condo that you can extract sufficient cash.

Or is the condo a vacation home? If so, it should be eligible for lower rates and fees than a rental home.

The best way to find the most affordable deal is to ask an experienced mortgage consultant to prepare Good Faith Estimates for a few scenarios. This will help you compare monthly payments and the cost of financing to determine the best deal.
Which is better? Lower mortgage rate or less closing costs? Go here for help comparing mortgage rates to closing costs.
Assuming you do not have adverse tax consequences (consult your CPA), remember that getting financing doesn't have to be an either/or. Maybe you want to consider a maximum cash-out refi on the condo in addition to a modest mortgage on the new home.

But as I already mentioned, write down 2 or 3 scenarios and ask a loan representative to prepare Good Faith Estimates for each proposed mortgage. Otherwise, you are mulling over ideas instead of actual numbers.

Mortgage Financing Should Not Keep You Up at Night

I do have one more thought I'll throw out. If you will sleep better at night knowing the retirement home has little to no financing on it, refinancing the condo could be your best option, even if the cost of the mortgage rate and closing costs are higher. Only you can make that decision, assuming you qualify for both scenarios.
When building or remodeling a home, make sure you have sufficient resources to pay for the project. Beware of overspending. Meet Rich in Michigan who writes Kate about his challenges while completing his remodel at Ask Kate About Cash Out Refinancing After Building an Addition.
Best wishes,

Ask Kate

Complications to Refinancing Mortgage After Divorce

By Walter in Broomall, PA
Complications to Refinancing Mortgage After Divorce

Kate,

I'm finalizing the divorce and working with a guy to refinance my home. He seems to be lacking the skills to move quickly.

In the recent days, we find from the mortgage company that my ex-wife took out a home equity loan last year.

I am responsible for paying off any mortgage and liens. Last year, I was told by her, she took out a loan for $24,000. She did not report it as a home equity loan and did not disclose it in any part of the divorce agreement.

Do I have the right to ask for more time in refinancing? Or possibly looking in to getting the loan agreement she made with the mortgage company by petition with the court?

I have a very good credit score (an average of 740) and no late payments in the last 6 months, good numbers in the bank, etc.

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Complications to Refinancing Mortgage After Divorce

Hi Walter,

The fact that your personal finances are still in order (credit score, credit history, and cash reserves) after a divorce is commendable.

But any time additional financing has to be paid off during a refinance, the homeowner stands the chance of paying for higher interest rates and additional closing costs due to an increased loan-to-value.

How to Get Help When Home Financing Has Been Wronged

I suggest you go back and peruse your divorce decree to find out if your ex-wife had the legal right to add secondary financing to the home without your permission and without disclosing it during the divorce proceedings. Then I recommend calling your divorce attorney for help in regards to your ex-wife's actions.

I am also wondering how the mortgage company got away with funding that 2nd mortgage without your notarized signature. So hopefully, your attorney can also explain your rights relating to the 2nd mortgage to which you did not agree.

Additionally, go to How to Contact Washington DC, Write Your Government Agencies, and File a Mortgage Complaint, which also includes help for contacting the Consumer Financial Protection Bureau (CFPB). These are sources in the government that you can ask for assistance in solving your plight.

Compare More Than Interest Rates: Choosing a Mortgage Originator

One last thought. You do not seem confident about your choice in mortgage originators. Choosing a competent originator is crucial to the success of your refinance. So don't settle for mediocrity. Go here for help with Comparing Mortgage Lenders - Avoid Borrower Remorse.

Best wishes,

Ask Kate

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