Divorce Buyout: Transfer of Quitclaim & Refinance Cash-Out

What is the name of your state? CA

My wife and I are divorcing and we agreed that I should buy her out of her interest in the house. I understand that I have to get a refinance to get her name off the mortgage (and also so she can get her share of the house equity), and that she'd have to sign a Quitclaim Deed to get her name off the title. The problem is my wife's insisting on not handing over the Quitclaim until she gets the cash-out from the refinance. My questions are:
1) Can I get (and close) a refinance without her having to sign the Quitclaim immediately?
2) If NO to #1, can we use the escrow to handle the transfer of the Quitclaim and the loan cash-out? Also, will the escrow handle the recording of the new title using her Quitclaim?
3) Since the cash-out does not cover her full share of the equity, will the escrow allow me to deposit via check the remaining balance.

Thanks in advance for your answers.What is the name of your state?What is the name of your state?

ronofsandiago said:

What is the name of your state? CA

My wife and I are divorcing and we agreed that I should buy her out of her interest in the house. I understand that I have to get a refinance to get her name off the mortgage (and also so she can get her share of the house equity), and that she'd have to sign a Quitclaim Deed to get her name off the title. The problem is my wife's insisting on not handing over the Quitclaim until she gets the cash-out from the refinance. My questions are:
1) Can I get (and close) a refinance without her having to sign the Quitclaim immediately?
2) If NO to #1, can we use the escrow to handle the transfer of the Quitclaim and the loan cash-out? Also, will the escrow handle the recording of the new title using her Quitclaim?
3) Since the cash-out does not cover her full share of the equity, will the escrow allow me to deposit via check the remaining balance.

Thanks in advance for your answers.What is the name of your state?What is the name of your state?

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Your wife would come to the closing and everything, including the quit claim deed, would be handled there.

You don't need the title company to handle the remaining balance. You can just have a cashier's check, made out to your wife, ready to hand to her at the same time.

Note that it's not always necessary to go through this expense. Maybe my situation was unusual, but I didn't have to refinance. If refinancing is expensive or if you're getting worse interest rates, make sure your attorney can't offer any alternatives.

In my case, I was the primary breadwinner throughout the marriage. Our equity was about 40-45% of the home value and real estate in my area has not suffered. There are plenty of other assets (mostly in retirement accounts) to cover the cost of the mortgage. Even after my ex got a job during the divorce process, I was making considerably more than her. In this situation, I paid her for her share of the equity, she signed a quit-claim deed, and I signed a hold-harmless. If I defaulted, the mortgage company would then go to her. She would be able to collect the remainder from my other assets or the mortgage company could sell the house.

I realize that the above situation may not apply too often, but it saved me several thousand dollars in refinancing costs - and I think the interest rate would have gone up by a full percent, as well, so it worked out.

mistoffolees said:

Note that it's not always necessary to go through this expense. Maybe my situation was unusual, but I didn't have to refinance. If refinancing is expensive or if you're getting worse interest rates, make sure your attorney can't offer any alternatives.

In my case, I was the primary breadwinner throughout the marriage. Our equity was about 40-45% of the home value and real estate in my area has not suffered. There are plenty of other assets (mostly in retirement accounts) to cover the cost of the mortgage. Even after my ex got a job during the divorce process, I was making considerably more than her. In this situation, I paid her for her share of the equity, she signed a quit-claim deed, and I signed a hold-harmless. If I defaulted, the mortgage company would then go to her. She would be able to collect the remainder from my other assets or the mortgage company could sell the house.

I realize that the above situation may not apply too often, but it saved me several thousand dollars in refinancing costs - and I think the interest rate would have gone up by a full percent, as well, so it worked out.

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That is an arrangement that honestly no one here would advise that someone do....and most attorneys wouldn't either.

That ties up your ex's credit for the length of your mortgage, and your ex may come to seriously regret that. She will discover that somewhere down the road when she tries to finance a major purchase and gets turned down. She probably won't even be able to finance a car. That may not matter to her now, but down the road, it could matter a great deal.

Don't be surprized if she takes it back to court sometime in the future, to try to get you ordered to refinance the home.

LdiJ said:

That is an arrangement that honestly no one here would advise that someone do....and most attorneys wouldn't either.

That ties up your ex's credit for the length of your mortgage, and your ex may come to seriously regret that. She will discover that somewhere down the road when she tries to finance a major purchase and gets turned down. She probably won't even be able to finance a car. That may not matter to her now, but down the road, it could matter a great deal.

Don't be surprized if she takes it back to court sometime in the future, to try to get you ordered to refinance the home.

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She had absolutely no problem financing (and, later, refinancing) a home in her own name. Given that, it would be hard for her to show sufficient harm to justify my spending thousands of dollars (and, probably, a higher interest rate) refinancing.

mistoffolees said:

She had absolutely no problem financing (and, later, refinancing) a home in her own name. Given that, it would be hard for her to show sufficient harm to justify my spending thousands of dollars (and, probably, a higher interest rate) refinancing.

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Well, either she put down a very large down payment, or she had enough credit room to allow for your mortgage as well as her own. Most people are not in that same position.

LdiJ said:

Well, either she put down a very large down payment, or she had enough credit room to allow for your mortgage as well as her own. Most people are not in that same position.

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Which is why my initial post said "I realize that the above situation may not apply too often". My point was that if it DOES apply, it might be worth considering as the savings could be significant.

mistoffolees said:

Note that it's not always necessary to go through this expense. Maybe my situation was unusual, but I didn't have to refinance. If refinancing is expensive or if you're getting worse interest rates, make sure your attorney can't offer any alternatives.

In my case, I was the primary breadwinner throughout the marriage. Our equity was about 40-45% of the home value and real estate in my area has not suffered. There are plenty of other assets (mostly in retirement accounts) to cover the cost of the mortgage. Even after my ex got a job during the divorce process, I was making considerably more than her. In this situation, I paid her for her share of the equity, she signed a quit-claim deed, and I signed a hold-harmless. If I defaulted, the mortgage company would then go to her. She would be able to collect the remainder from my other assets or the mortgage company could sell the house.

I realize that the above situation may not apply too often, but it saved me several thousand dollars in refinancing costs - and I think the interest rate would have gone up by a full percent, as well, so it worked out.

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My wife is kind enough to agree not to go after my retirement and personal accounts. We're just dividing our house, and at this point I don't mind paying for all closing costs - anything not to piss her off so she reneges and goes after the rest of my stuff. And she wants a clean break, no entanglements whatsoever - the refinance is the way to go here.

LdiJ said:

Your wife would come to the closing and everything, including the quit claim deed, would be handled there.

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At this point, our only means of communication is via email or through her brother. I get the feeling she wants to keep it that way - so showing up in person at the closing might not be an option for her.

LdiJ said:

You don't need the title company to handle the remaining balance. You can just have a cashier's check, made out to your wife, ready to hand to her at the same time.

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My wife's a little paranoid about me not handing her the cash-out transfer. Using the escrow will ensure that since the cash-out doesn't go through me at all. I suggested that she gives specific instructions to the escrow regarding all manners of transfers so that should allay all her fears.

Another question - will the escrow company charge me extra for this arrangement?

The deed can be presigned and notarized, and held "in trust" by the title company closing the deal until loan disbursement. Ex or her atty can have a Letter of Instruction accompany the deed, establishing to the title company the conditions under which the deed can be released (in other words, released upon disbursement of pay-off funds to ex, even if by express mail).

i went through this last year

My ex-H paid me my share of the home equity by refinancing the house. I also was a little worried about getting my money, but I talked to the escrow officer at the title company, she explained that they do this all the time. The quit claim that I signed stated that I was receiving X amount of money in consideration for releasing my claim on the property. I gave the title company the wire instructions for my bank, and signed the quit claim before the closing. The title company handled all of the money and could only release the cash-out funds to me per the quit claim instructions.

If you pay the extra amount you owe her to the title company, just like you would pay closing costs, they could probably include it in the check to her.

I also talked to a friend who does mortgages just to confirm that I wasn't going to get burned by doing this, he assured me that the title companies handle these kind of transactions frequently and that I could sign before the closing and still be protected.

If the amount is already known, provide that info to the title company, and give the name of the escrow officer to your ex, she can deal with them directly to provide the funding instructions (a check or wire transfer).