The Cash-Out Refinance That Trips the Florida High-Cost Test

Yes - it is a high-cost home loan.

• The points-and-fees trigger: $18,750 / $312,500 = 6.0% of the total loan amount. For loans of $20,000 or more, points and fees exceeding 5% of the total loan amount make the loan high-cost.
• That classification matters because the loan as structured carries two prohibited features:
  • a prepayment penalty, which may not be imposed on a high-cost home loan; and
  • a balloon payment, which is also prohibited.
• Other barred practices to check: negative amortization, a call provision, an interest-rate increase upon default, financing points and fees into the loan amount, and making the loan without due regard to the borrower's ability to repay.
• So Rosa's question answers itself: she cannot finance the points and fees into the loan amount on a high-cost loan.
• Practical fix: restructure to remove the prepayment penalty and balloon, reduce points and fees below 5% (or price differently), and verify the repayment-ability analysis is documented before closing.

$1,093.75.

• Florida documentary stamp tax on a mortgage (and the note it secures) is $0.35 per $100, or fraction thereof, of the indebtedness.
• $312,500 / $100 = 3,125 increments
• 3,125 × $0.35 = $1,093.75
• The tax is computed on the full amount of the new note. There is no credit for the existing mortgage being paid off on a refinance - a common borrower misconception worth correcting up front.
• No deed transfer tax applies here because no property is changing hands; the deed rate (and the higher Miami-Dade surtax) is irrelevant to a refinance.
• The MLO should not guess at closing figures: confirm the amount with the closing agent, who computes and remits the tax, and reflect it on the Loan Estimate and Closing Disclosure in the correct category.

Yes - he must join in the mortgage.

• The property is Rosa's Florida homestead: it is her primary residence, and her spouse has homestead rights regardless of whether his name is on the deed.
• Under the Florida Constitution, a valid mortgage encumbering homestead property requires the signature of both spouses. The spouse does not have to sign the note or become personally liable for the debt - his joinder goes on the mortgage only.
• If the husband does not join, the mortgage is voidable as to the homestead, which means the lender's lien can be challenged. That is a title and enforceability defect, not a paperwork inconvenience.
• Rosa should also be told that a new mortgage on homestead property does not disturb the homestead exemption itself, but any change in ownership or use can, and the homestead exemption application should be reviewed with the county property appraiser.
• Action item for the MLO: flag the spousal joinder requirement to the closing agent and the title company immediately, before the CD is prepared, so the closing package includes the correct signature block.