During the process of a divorce when a couple is considering what to do with the common house, the leaving spouse many times will demand cash for the portion of equity they believe is rightfully theirs. When this is added in the final divorce decree papers, if the spouse keeping the house can not come up with the cash, it is sometimes required that they sell the house and share the equity. That is not the only option. You can use that property as collateral and create an owelty loan that puts the leaving spouse on the home as a “lien holder”. Then, you refinance the house like a normal refinance and pay them off…you can get up to 95% loan to value. That’s different than the Texas Cashout a(6) option that only allows up to 80% plus other limitations. Here is a list of posts I’ve written that tells you all you need to know about an owelty as it pertains to divorce.
Refinance Options When Doing the Owelty Refinance
- You can use up to 95% of the value of your home in this refinance…example: $100,000 value home, with a current mortgage on it for $80,000. You refinance and pay off the current $80k mortgage and can include up to $15k more to pay closing costs and pay off the leaving spouse
- Refinance using borrower paid PMI…PMI= Private Mortgage Insurance and it is a monthly cost that goes away once you pay your mortgage down to 78% of the value of your home
- lender paid PMI…this comes with a slightly higher interest rate than the above PMI option, but typically the total payment is lower here because the higher rate increases the total monthly payment less than the other option with the addition of a monthly mortgage insurance cost
- if your new loan is under 80% of the value the home, you have no decisions to make about aforementioned structures…the best option is the only option.
Rates are very low, so consider looking at 20yr, 15yr, or 10yr fixed mortgage rates and notice wether or not they actually increase you monthly payment above what is comfortable.
More from my Owetly Refinance Video Blog
Not completely clear on everything? Would you like to be? For Free? Lets talk. Just call. 469-450-2723 is my cell number. Brad Lynch, Your Mortgage Guy For Life!