Friday, April 15, 1994

Mortgage Refinance and Appraisal

I kept the house in the divorce.  A "Special Warranty Deed" dated February 24, 1994 made me the sole owner of both the house and the mortgage.

After the divorce, it seemed reasonable to refinance the house, removing my ex-wife's name from the loan.  This was accomplished on 15 April 1994 with a new 30-year 7/23 mortgage of $159,200 at 5.99%.  This paid the balance of the first mortgage of $154,809.21 plus closing costs.  Closing costs included a 1% loan origination fee ($1592), title insurance ($1501), and an appraisal fee ($325), among other things.

A 7/23 mortgage is a variable rate mortgage.  The rate is fixed for the first 7 years, and then adjusts to a different rate for the last 23 years.  The rate would change on 1 May 2001, and could go as high at 10.99%.  The new rate is 1% more than the 30-year standard conventional fixed rate mortgage index of the Federal National Mortgage Association (Fannie Mae), rounded up to the nearest 1/8 percentage point, but limited to no more than 10.99%.  While this is potentially a high interest rate, my expectation would be to either sell (both kids will be out of high school by 2001) or re-finance before that time.

(Update: the Fannie Mae index for May 2001 was 7.21, so my new interest rate would have been 8.25%)

The appraisal compared our house with 3 close by that had been sold recently, trying to adjust for the difference in age, size, and so on.

The appraisal tried to figure out exactly the size of the rooms.

and how they were used.

As well as what the house looks like, front

and back.