An attorney called me concerned that her client, Jill*, would not be able to afford to keep the family home after divorce. Jill wanted to keep that home but the attorney believed her budget couldn’t tolerate the payment. Jill insisted that she could figure out a way to make it work on her salary as a teacher. I asked to see the budget and a mortgage statement.
Here is what I saw: The mortgage had been in place for many years. The payment was based on the original balance and a 15 term. The original mortgage was $320,000 at 6% and the payment was $2,700. The payment was nearly $3,700 when property taxes and insurance were included. That would certainly bust the budget of most teachers.
BUT the family had been making payments for 12 years! The principal balance was down to only $80,000. We worked with a mortgage lender who was able to refinance the balance, greatly reducing the mortgage payment to closer to $400 a month, which reduced housing costs to $1,400 a month. The client earned just enough money to qualify for the new loan. AND she and her children were able to stay in their home at an expense that was less that the cost of moving into a smaller rental apartment.
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