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MORTGAGE CASH OUT AND BUYOUTS

June 14th, 2022



Mortgage Buyout Loans

The divorce process can make real estate even more complicated. Our goal is to provide the answers to common questions when you are going through Divorce.

Such as how does a home buyout work in a divorce and, what is my house worth?

 

How much accessible equity is in the home?   

This is not as straightforward as you might think, but we have the knowledge and experience to help. To help you get an idea you can try out, our Divorce Buyout Calculator

Enter in a few numbers to get a starting point of how much equity is in your home. 

We can walk you through this process and get you prequalify for the mortgage cash out.

 

What happens to a mortgage in a divorce?   

There are several options that spouses need to consider when deciding on what to do with the family house. Read Who Gets the House in a Divorce in Texas?   

One of the most powerful tools to help buy out your spouse is what is called an Owelty Lien.     

Use our Divorce Buyout calculator to help determine what your situation looks like after fees, so you can see how much equity remains to split for all three scenarios and determine which option is best for you. 

 A buy-out of equity involves buying out the existing legal owner of a piece of real estate (your spouse). Refinancing the existing mortgage is the most common way to acquire equity ownership in the marital home from an ex-spouse.

Before you go to mediation and write up the divorce buyout agreement form, you can use this calculator to determine how much equity there is in the house. 

Knowing your options will help you make an informed decision because we believe knowledge is power. Then you can know for sure the answer to the question we get asked all the time, 

 

Thinking about buying out your spouse?  

 What is a buy-out? A buy-out is when one owner of a property pays the other owner's share of the property equity so that the co-owner can be released from the mortgage and removed from the deed as owner. 

It is not uncommon for clients to want to keep their home for several reasons, such as not wanting to lose it to their ex, being emotionally attached to it, or for the children.   If you choose to buy out the other spouse and stay in the house, you should know that it comes with some risks, including ones that you may regret in the future. 

 

Refinance vs a Divorce buyout?  

Refinancing is usually either a rate/term refinance or a cash-out refinance. Rate/Term refinances typically offer better terms in terms of lower interest rates and more equity. On the other hand, a cash-out refinance typically carries a higher interest rate and only allows the borrower to access up to 80% of the home's value, which could cause a problem when the goal of the refinance is to actually access the equity.

A divorce settlement agreement needs to be written (the Correct) in a way that allows the divorcing borrower to refinance as an Equity Buy-Out. This way divorced borrowers can access more equity in their homes without having to undergo higher pricing adjustments. 

We can even help access 95% of your home equity in some cases! 

Decide which party should buy out the other 

One of you may be able to qualify for a loan better than the other. A borrower whose income can be verified and has good credit will get a better rate than one whose income cannot be verified.  

 

Alimony and child support can be used as verifiable income, but the income must have been received for 6 months and continue on for 3 years

If you own a cash business or recently were self-employed, this income typically cannot be verified to qualify for a mortgage. Any self-employed job must have 2 years of history and usually, that income earned is an average of those years. Both you and your spouse should speak to a mortgage professional about your ability to qualify.   

It is possible to divide property and assets in an equitable manner. However, if one of you is unable to qualify, or only qualifies for a significantly higher rate, that should be negotiated. You may choose to divide assets through other means if there is a substantial difference in what you qualify for, or simply sell the home and divide the proceeds. 

Prior to agreeing to a buyout, you need accurate information regarding the types and costs of loans that would be available to either of you.

 

Maintain Credit, 

Most people who go through a divorce find it difficult to pay their bills. Temporary support payments may not be coming in on time; you and your spouse may have had a disagreement about who will be responsible for paying which bills; your income may not stretch to support two households, or you may have moved out and have not seen the bills. When going through a divorce, many people find it difficult to maintain perfect credit for various reasons.

In order to make smart financial decisions, you need to understand the challenges associated with refinancing to buy your spouse out. Make sure that the mortgage professional you choose understands what you're going through and what you need to accomplish. Divorce is a difficult time, emotionally and financially. More than anything, you need accurate, reliable information so you can get a good rate, buy out your ex, and move on with your life. This divorce does not have to define you. This too shall pass. 

Learn about the 5 Biggest Real Estate Mistakes in Divorce

Get pre-approved today

Read more or our New Beginnings Blog post 


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Disclaimer : The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the Houston Association of REALTORS®

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Our focus is on Divorce and Real Estate, We can help you during all stages of divorce, as we have relationships with divorce professionals. Rest assured that you will be working with professionals at all times, and we have the team to support you.
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25807 Westheimer Pkwy Ste 240, Katy, TX 77494   Get Directions
Phone: (713) 395-4975
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