Refinance or Sell? Finances + Ethics
March 19, 2016 8:51 PM   Subscribe

Due to a mediated agreement in divorce proceedings, I'm faced with either refinancing or selling. I planned on selling the house soon anyway, but now my ex-partner is pushing to have it refinanced IMMEDIATELY. Looking for advice...lots more details beneath the fold.

(asking for a friend)

My ex and I separated in May 2014, and the divorce was finalized in July 2015 (NC requires a one-year separation/waiting period). As part of the mediated agreement, I got to keep our shared house, mostly because it was financially underwater and I was willing to deal with it at the time. The same agreement states that the house was supposed to be refinanced to remove ex's name from the mortgage by January 2015. We do have a quit-claim deed that states she is not financially liable for the property.

I was unable to refinance at that time because the house appraised for less than the mortgage amount. Ex didn't express that this was a problem at the time.

Now (about a year later), she is trying to buy a new car and told me that the bank won't give her a car loan while she's still listed on the mortgage. I have reasons to doubt the veracity of that statement, but for the purposes of this question, let's pretend it's true.

Other relevant information:

As of now, I would estimate there is somewhere between a 5 and 10k gap between the loan balance and the appraised value of the home (let's say I owe 100k and it's been appraised at between 105-110k), though the window still could be outside of the range the bank requires to refinance.

I am planning on buying a new house closer to my work sometime in the next 6-8 months.

The house (which I am living in) probably needs around 5k worth of work to make it ready-for-sale. This work would includes some smaller stuff (deep cleaning, fixing porch railing, replacing screen doors destroyed by a Great Dane, painting, rewiring a porch light), and one more major (and expensive) project. When we bought the house, it was listed as a 2 bedroom 1 1/2 bath. However, the "1/2 bath" only has a toilet. NC law requires there to be a sink to qualify as a 1/2 bath. The subfloor in that bathroom also needs to be replaced, regardless of what else is done in there. The difference that 1/2 bathroom makes could be as much as 10k, for what will probably be 2-3k to get it to that point.

I have not tried to get the house refinanced again, but my guess is that the bank would do it this time, since the loan-to-value range is better.

It would cost a few thousand dollars (which I have, but that would make it really difficult to fix the issues in the house to prepare for sale) to refinance it. That seems like the ethical thing to do, but also the financially irresponsible thing to do.

The other option would be to list the house now (with the hopes of fixing issues as and when I can afford them). I live in a location where the house likely wouldn't sell quickly (there are 6-8 other houses for sale in a few block radius). It could sell in a week, but it also could be 6-8 months. Who knows. I do have a kid in elementary school, and I'd really rather not move until summer, though I would if I had to.

This has also been a very contentious relationship (with the ex) and her responses can change from "Sure, no problem!" to "EFF YOU I'M CALLING A LAWYER" within a few minutes. I have done my best to shield my child from any of this, and will continue to do so. The interactions I have with my ex during which my daughter is present are calm and benign. Most of the conflict happens over text message.

So there are a lot of moving pieces and we're trying to figure out what option will be the best, both short-term and longer term. Would appreciate advice. Thanks!
posted by guster4lovers to Home & Garden (9 answers total) 1 user marked this as a favorite
Legally it sounds like you don't have a leg to stand on, unfortunately. Regardless of whether her bank is actually denying her a loan - you agreed to have the house refinanced to get her name removed by January 2015. You're already 14 months late.

Given that you note that your relationship with her has been very contentious, I would take the hit, get it refinanced immediately, and do what you can to move on and move past her. This is just one more way to disentangle her legally and emotionally from your current, post-her life.

Good luck!
posted by arnicae at 9:03 PM on March 19, 2016 [17 favorites]

There are lots of reasons that you don't want to refinance, but you legally obligated to do so in your divorce agreement.

Refinance and be done with it.
posted by 26.2 at 11:37 PM on March 19, 2016 [1 favorite]

My ex took forever on this too and I had to pay a lawyer to start sending letters etc, it was very frustrating because this is what they agreed to in the divorce paperwork (which was slightly more in their favor because of it too, grrrrrrrr). It kept my credit score down and made it harder and more expensive to make large purchases and almost impossible to get loans. Your ex is not trying to make your life harder, you are being very unfair here.
posted by meepmeow at 11:53 PM on March 19, 2016 [11 favorites]

Well, when it's well over a year after the agreed date, they don't want it refinanced immediately (that ship sailed waaaaaaaaaay back) they just want it done already.

We can all rewrite this question from the ex partners perspective and if they had posted it, we'd feel super sorry for how stuck they are not being able to break free of these entanglements once and for all.

Refinancing sounds like the best option for you now. Moving closer to work, will that effect your child's elementary school? Maybe time the move so you do it for when they switch to middle school so they don't change schools twice. Being closer to work is nice but doesn't sound like an urgent need.
posted by kitten magic at 12:53 AM on March 20, 2016 [1 favorite]

Even though we've gotten the story from you, and your ex hasn't told her side of things, it seems clear that you are completely in the wrong. You have already failed to keep your end of the bargain, and you're trying to rationalize continuing to do so. You are making your ex carry a burden that only benefits you.

she is trying to buy a new car and told me that the bank won't give her a car loan while she's still listed on the mortgage... for the purposes of this question, let's pretend it's true.

Okay. Are you prepared to pay for a rental car for her, for the entire time between now and when the house is sold or refinanced? No? Then get a move on.
posted by jon1270 at 4:52 AM on March 20, 2016 [1 favorite]

Legally, it sounds like you definitely need to solve this ASAP, and you seem to be accepting this which is good.

Personally I wouldn't refinance if I was planning to turn around and sell it six months later (because you are then out the cost of the refinance on top of everything). I'd just sell it now (making whatever repairs are necessary or possible at that time), and if necessary plan to rent for six months and then house shop for the fresh start.

If you have the money, make the repairs; if you genuinely don't have the money, just put the place on the market and accept the value as-is. Either way, don't get caught up in magical thinking that results in more inaction and leaves your ex hanging out there even longer.
posted by Dip Flash at 5:44 AM on March 20, 2016 [1 favorite]

Agreed that you owe it to your ex to get her off the mortgage NOW. If you really don't want to because you see yourself selling the house soon, you could offer her $1000 or something (still less than refi costs, it sounds like) to hang in there until it sells. But if she doesn't accept that offer, just do it. It's a shame that it's costing you money, but divorces do that...
posted by metasarah at 6:41 AM on March 20, 2016

Have you shopped around for a refi? I can't tell if you are using "the bank" as a collective noun or you are actually limiting yourself to a single bank. You have better options if you shop around, and you may be able to get a loan with no closing costs (aka negative points). In exchange, the interest rate will be higher, but if you are planning to sell the house soon anyway, it's probably better to pay a slightly higher interest rate for a few months than thousands in closing costs upfront.

You do have PMI to worry about with your LTV ratio. This is also something that will vary from lender to lender.
posted by mama casserole at 6:49 AM on March 20, 2016

You are now in contempt of a court order (your divorce decree). All the other details are unfortunately not important.

(Just an hour ago I had a phone conversation with my oldest son who is in the position of your ex. His ex was supposed to refinance by January of 2015, did not, and he didn't push it. Now he wants to buy a house and cannot get a loan because his name is still on the mortgage and three house payments were over 30 days late in the last year. He was told today that his credit score was hit hard and he needs to wait another year to get it back up.)
posted by raisingsand at 7:17 PM on March 21, 2016

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