Don’t Quitclaim deed to your ex-spouse too soon!

Being responsible for mortgage when name's off deed is a lose-lose situation.

Q: My ex-wife wants me to sign a quitclaim deed to the house that we presently own. We are both listed on the mortgage. My question is will my signing a quitclaim deed now, in any way, affect the divorce decree that states that she agrees to sell or refinance the home within five years from the divorce date?

In other words, will the divorce decree in any way be potentially compromised by me signing away my rights to the home using a quitclaim deed?

A: If I were you, I wouldn't sign a quitclaim deed to the property until your ex-wife refinances it and your name comes off the mortgage.

If you sign the quitclaim deed now, you give up all rights to the property -- but you'll still be legally on the hook for the mortgage payment each month. And if for some reason you are legally not on the hook for the payment, your credit history will be. That's a losing scenario for you, particularly in a divorce where emotional baggage comes into play.

Instead, tell her that when she's ready to refinance, you'll be more than happy to sign the quitclaim deed at the closing. She won't like it, but you'll be protecting yourself.

Q: I bought a house almost two years ago. I used a special first-time buyer's program, which fixed the interest rate of the loan at 5.5 percent for five years. After that, the loan adjusts to a one-year adjustable-rate mortgage (ARM).

Can I refinance the loan after five years and get a fixed-rate loan again?

A: You should be able to refinance your loan after the five-year fixed-rate period expires. But I'd start the process about four to five months ahead of when your rate expires. Ideally, you'll want to keep that rate until the very last month until it ends, and then close on your new loan.

The only exception to this would be if interest rates drop down again to below 6 percent. Right now, a 30-year fixed-rate loan is about 6.7 percent. That's still low, historically speaking, but not as low as they were a couple of years ago.

If interest rates do dip below 6 percent for a 30-year fixed-rate mortgage, I'd consider refinancing at that time. While the interest rate may not be quite as low as your 5.5 percent rate, it will be a fixed rate at a very attractive rate.

So, keep an eye out on what happens in the world of mortgages and interest rates over the next few years.

Q: When a property is termed "conventional" in the local multiple listing service, is this based on the type of loan the buyer must get? And is 20 percent in cash required for a down payment?

Does the down payment have anything to do with how much earnest money you put down as a show of good faith when you put forth the contract?

A: You are not required to put down any specific amount of cash for a down payment. The earnest money given in good faith is simply that -- a show of good faith. You need to put down enough to give the seller the idea that you're serious. In some cases, it's $1,000; in other cases, it's $50,000 or even 10 percent of the purchase price.

Your agent should be able to advise you on what is customary for your area. But since most of major metropolitan markets currently favor the buyer, and sellers are desperate to sell in many cases, they may settle for a modest earnest-money deposit. But the less money you put down, the more nervous the seller will be that you might not have the will or the means to go through with the purchase of the property.

By Ilce R. Glink

Inman News