Mortgage market: Is it a good time to refinance?
Mortgage market can change, and homeowners' personal circumstances can, too. After marriage, is it a good idea to refinance a mortgage to include both spouses regardless of the mortgage market? Look to question No. 1 in the reader mailbag.
What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.Skip to next paragraph
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Sometimes, if the wind is wrong, we’ll get some cinders on us, but they’re well worth it for the wonderful sight of seeing the sky explode before us and hearing the children laugh and point at the lights.
Q1: Refinance mortgage to add spouse?
I recently got married, and my new husband and I are having our first financial disagreement. He has asked me to refinance my house so that he can be added to the mortgage. I bought the house in July 2009, so I have owned it less than two years. I purchased the house for $135K. My rate at the time was 5.125% under a first-time homebuyer program. The bank is currently offering a conventional fixed-rate long-term loan at a 4.49% APR. In the two years of ownership, I have been dutifully putting extra money towards the monthly payment, and have essentially made 4-5 extra payments per year. The loan is currently at $119K.
While I understand the reasons why my husband wants to be on the mortgage, I am hesitant for a few reasons.
1) I believe the costs of refinancing will outweigh the benefits of the slightly lower rate. We have not yet visited a mortgage officer to get actual numbers, but basic online research suggests the costs could be around $3K. I would rather apply that money toward the principal.
2) He is a member of the military and has never owned a home. This gives him advantages such as a VA loan. We would like to buy a larger house or duplex eventually and rent out my house. (Given it’s location and size, we know that in our housing market we can rent it out for the monthly mortgage payment.) If he is added to my mortgage, we are not certain if he would be able to utilize the VA loan if we did not sell my house prior to purchasing a new house.
I have suggested we instead investigate using a quitclaim deed to add him to the title of the house. He does not seem keen on this idea. What are your thoughts on refinancing given the stated situation?
Given these facts, I don’t think refinancing is the best option here. I would just leave the loan as it is.
So, what should you do in the interim? I would make sure that your husband has strong credit. Have him get a credit card for a specific purpose like buying gas, use it for nothing but gas, and pay off the balance in full each month. This will steadily build his credit.
You should also focus on paying off that house as quickly as possible. That house payment is a big negative in your home’s cash flow and it needs to be eliminated as soon as possible. Once the deed is in your name, you can certainly add his name to that deed.