How to Get Money to Buy Out Your Ex
About 50% of the married people in the US get divorced, and if they own a house together, the divorce settlement will typically say that whoever is keeping the house needs to buy out the other person’s interest within a certain period of time (usually 6 months).
Here’s the cheapest way to do that.
When you take money out of the equity you have built up in a house, it is considered to be a cash-out refinance, except if the house is owned by two people who are divorced. In that case, when one person is buying out the interest of the other person, it is considered to be a rate-and-term refinance, which has a lower interest rate than a cash-out refinance.
In order to get the lower rate, both people need to have owned the property jointly for the 12 months preceding the disbursement date of the new mortgage. Both parties will need to sign a letter stating the terms of the disposition of the proceeds from the refinance.
The person keeping the house cannot get any money from the refinance, but they are allowed to pay off the person who is not keeping the house.
If you are in this situation, you can go as high as 97% of the value of the house when you refinance. Regular cash-out refinance transactions are limited to 80% of the value.
Call us if you have questions about divorce buy-out refinances. They have lower rates than normal cash-out refinances, and they have higher loan-to-value ratios. It is one of the really good deals that are available if you use the right lender.