Divorce Mortgage Refinance: How a Spousal Buyout Can Help You Keep Your Home

Going through a divorce can make keeping the marital home a complicated financial decision. If one spouse is awarded the home, a divorce mortgage refinance may provide a way to buy out the other spouse's equity and keep the home.

Remember that changing names on the property title (via a quitclaim deed) only changes legal ownership, not financial responsibility for the loan.

In fact, your current  lender is not bound by your divorce decree. If both spouses signed the original loan, both are 100% responsible for payments on the existing loan even if the decree assigns the house to just one person.

Working hand in hand with your family law attorney our mortgage team will be able to assist with making sure you can qualify for the new loan, provide the expected costs to refinance, determine if there is sufficient equity to accomplish the refinance, and provide a realistic timeframe to complete the loan. The information and guidance from our mortgage team will be be of great assistance to your family law attorney BEFORE you sign a legally binding settlement agreement. 

One reason the information from our lending team is important is because the legal agreement must specify the buyout amount and the time period to complete the refinance. 

A spousal buyout refinance allows the spouse retaining the home to refinance the existing mortgage and use the new loan proceeds to pay the other spouse their agreed-upon share of the home's equity.

Depending on the loan program and specific circumstances, the transaction may qualify as a rate-and-term refinance rather than a cash-out refinance, potentially offering more favorable financing options. The benfits include less closing costs, a lower interest rate, and more affordable monthly payments.  

If you're facing a divorce and need to refinance the marital home or buy out your spouse's equity, we're here to help you understand your options and move forward with confidence.