I KNOW I messed up...how bad though?

[Dahlia]

In my recent divorce, the multiple rental properties that I own was split (2 went to me, 2 went to ex). I also got the primary residence.

Of my properties: 1 has a mortgage, 1 is owned outright, primary house has a mortgage.

The outright owned property was on the market during divorce, but failed to generate a good enough offer to take. So I found a tenant. My ex husband! Lo and behold, as soon as I take it off the market, a full price cash offer comes in. Argh. Maybe they were waiting to see if I was going to lower the price. Anyways, Ex husband says he really needs to rent this place because he cannot afford to live in this section of the city unless he rents through me because I'm charging him reduced rate to rent. And he needs reduced rent to get back on his feet. "ok- ok" I say. I turn down the full price offer.

Meanwhile, I need to take ex husbands name off the $92k mortgage for other rental. While I'm at it, might as well refinance, I figure. The loan lady made it sound easy. And I would be reducing my interest rate from 5.5% to 4%. And I could change it to a 20 year loan (from 30 yr) and my overall payment would be $100 less than current!

5 MONTHS LATER...I just successfully refinanced. Last week. It was a nightmare of paperwork. It was a nightmare of requesting documents only to have those docs become outdated and request some more. Ugh. If I had to do it over- I wouldn't.

It cost me $4400 to refinance. I swear the loan lady told me $2300...if she had said $4k I would have hung up on her. So that got partially wrapped into my mortgage and now I owe $94k. Maybe she meant I would have to come out of pocket $2300...IDK- I was just divorced. Things were jumbly.

Anyways, ex husband 's plan is to move out of my rental in a year. I'll put it back on the market. I expect to net $150k.

I also have a $192k mortgage on my primary residence. This mortgage needs to be changed into my name only. But after the last bad experience....I'm dragging my feet.

My plan is to change the mortgage into my name AFTER I sell the rental and apply the $150k to a mortgage and reduce my debt (and maybe reduce the awful experience of refinancing?).

So- Do I apply the $150k against my $94k rental mortgage? Wipe it out? My rental mortgage carries a higher interest rate because it is a business. On the other hand, I just paid $4400 to refinance it!

Or do I apply the $150k to my primary residence mortgage and reduce that to $42k? And then I'll change the mortgage into my name? I'm afraid it will cost me another $4400 to do this. Are refinance charges based on size of the loan? If I am only refinancing $42k opposed to $192k...will those closing costs be way lower?

I'm afraid it will cost me a total of $8800 just to take my ex husband off of two mortgages.

What would you do?

Hindsight: I should have waited to refinance. I should have waited 1 year, sold the outright rental and applied that money to wiping out other rental mortgage. Then I could have refinanced 1 property (primary residence). And saved myself refinance fees. ...I just didn't know it is that expensive to refinance. LESSON LEARNED.

[Petunia 100]

What is your financial objective? Do you want to grow your net worth as much as possible? Do you want to be debt free? Because the best way to accomplish one is often different from the best way to accomplish the other.

Why not just keep the paid for rental and rent it out at fair market rate? Are you trying to get out of the business of being a landlord?

I will say that you will likely have a very difficult time finding someone to write a first mortgage for 42k. However, if you choose to go that way, you will probably have no trouble opening a HELOC for 42k.

[Dahlia]

I want to reduce my monthly bills as much as possible. My annual income is about $50k between my full time job and the rental income. That leaves me with a low monthly income.

I don't mind that- because it keeps me flexible. I can get a job anywhere doing anything - no big salary requirement.

I have assets for retirement. Of course I could have more- but I don't feel the need to generate a huge amount of cash to put away for retirement. I feel I need to keep my monthly bills low so that I can live within my means.

I don't want to save this particular rental. Bad associations tied to it.

I won't be able to get a mortgage for $42k? I'm worried about Home Equity loans- variable interest rate. It scares me.

[~bs]

that sucks. yes you will have to refinance to get his name off the mortgage.

you could sell the rental house that has a mortgage. not sure how that will work cause his name is still on it. Apply the proceeds against your primary residence with the mortgage.

it says on the refinancing papers how much the refinance will cost.

[PeggyHefferon]

Is selling your primary residence and moving in with your BF an option? The money you save from those monthly mortgage payments could be given to your BF to put away for retirement. Win/Win

[Petunia 100]

I want to reduce my monthly bills as much as possible. My annual income is about $50k between my full time job and the rental income. That leaves me with a low monthly income.

I don't mind that- because it keeps me flexible. I can get a job anywhere doing anything - no big salary requirement.

I have assets for retirement. Of course I could have more- but I don't feel the need to generate a huge amount of cash to put away for retirement. I feel I need to keep my monthly bills low so that I can live within my means.

I don't want to save this particular rental. Bad associations tied to it.

I won't be able to get a mortgage for $42k? I'm worried about Home Equity loans- variable interest rate. It scares me.

You might, but typically lenders don't want to do such a small first mortgage. The costs to process are the same as any other first mortgage, but the payoff is small. You can sometimes lock in the rate on a Heloc draw, or even get a plain old second mortgage (even though they would technically be in first position).


It totally makes sense to keep your monthly overhead as low as possible. Doing so allows you a great deal of flexibility in your life.

[Petunia 100]

Is selling your primary residence and moving in with your BF an option? The money you save from those monthly mortgage payments could be given to your BF to put away for retirement. Win/Win

Co-habitation is certainly a way for both people to reduce their expenses. I'd proceed with caution before selling my own house, though.

(Full disclosure, I am planning to do the same thing, maybe this year. But I am not recently divorced, this is not a new relationship, and I am absolutely certain I wish to no longer be responsible for a house).

[phantom]

Forget about the $4400 you just paid. That money is gone and not coming back. Don't fall for the sunk cost fallacy and let the money you already spent sway you when thinking about the best next step.

Unless you think that you're likely to have an extra $42k to completely pay off your house, you're going to have to refinance it anyway. So, I would just go ahead and do that now. Pick a different lender this time. Refinancing shouldn't be as painful or as long and drawn out as your last experience was.

Then, worry about what to do with the proceeds from the rental in a year when you actually have that money in your pocket and know exactly how much money it is. A lot can happen in a year that might lead you to make a different decision than you'd make right now.

[PeggyHefferon]

A lot can happen in a year that might lead you to make a different decision than you'd make right now.

Great point.

[Dahlia]

Well that is disappointing that the loan fees are the same regardless of amount financing.

It is also too bad that no one has a work around.

I've crunched the numbers and decided to apply the full profit from rental property sale to the primary house mortgage, bringing it to $42k. Then I think I can buckle down and pay it off sometime in 2020. That will save me from paying the loan fees to refinance.

If ex husband asks about it, I'll explain the numbers. The only reason he would protest would be if this mortgage interfered with him qualifying for a loan himself, and I would expect our divorce paperwork stipulating that the house and loan goes to me would satisfy that problem.

[Petunia 100]

The loan fees charged to you may indeed be less; the cost of processing the loan to the lender is pretty much the same.

You know, I don't think you messed up. You made the best decisions you could with the information you had at the time. You seem like a smart cookie to me and I hope you stick around.

[SueInBoston]

Well that is disappointing that the loan fees are the same regardless of amount financing.

It is also too bad that no one has a work around.

I've crunched the numbers and decided to apply the full profit from rental property sale to the primary house mortgage, bringing it to $42k. Then I think I can buckle down and pay it off sometime in 2020. That will save me from paying the loan fees to refinance.

If ex husband asks about it, I'll explain the numbers. The only reason he would protest would be if this mortgage interfered with him qualifying for a loan himself, and I would expect our divorce paperwork stipulating that the house and loan goes to me would satisfy that problem.

Ask your mortgage company to see if they do Loan Assumption. I too recently divorced and bought out my ex's interest in the home. I didn't want to refinance as I'm at 3.5%, after much research, I came upon loan assumption. I paid $900 fee and assumed the mortgage with same rate and term. My divorce agreement stipulates that i take his name of the mortgage, he in return gave me a quit claim deed.