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Divorce Equity Buy-Out Pre-Approval in a Changing Mortgage Environment

The mortgage rates for 30-year fixed-rate loans are higher now at more than 6%. This makes it difficult for divorcing homeowners who want to refinance for an equity buy-out or purchase a new home. Most homeowners facing divorce are faced with refinancing their mortgage. They will likely have an interest rate of 4% or lower. Recent increases have caused them to look at rates between 6.5 and 7%. Most people don’t want to change from a historically low mortgage rate to one that is higher. Divorced homeowners might have no choice but to refinance in order to keep their marital home or to purchase a new one after the divorce.

What are the real effects of rising rates and how does it affect affordability after a divorce?

Although obtaining a mortgage is more complicated in a divorce situation, securing a pre-approval for an equity buyout should be among ones top priorities. Preapproval for a mortgage to purchase a home is a common practice over the years. Pre-approval is a sign that the buyer has the financial ability to finance a mortgage to close the transaction. Pre-approval for mortgage financing is a crucial step for home buyers. It should also be a first step for divorcing spouses prior to refinancing the marital home.

If new mortgage financing is needed, the spouse who is retaining the marital property should require preapproval for equity buy-out from the retaining spouse. The divorce decree may require the spouse who is vacating the home be removed from the mortgage, this would mandate that the retaining spouse refinance and provide cash from the equity to the vacating spouse.

  1. A pre-approval for Equity Buy-Out allows the certified divorce lending professional to account for all income requirements, joint or individual debt, as well as assets required to finance a new mortgage.
  2. Pre-approval for Equity Buy-Out can help eliminate fear about selling your home if mortgage financing is not available to the retaining spouse. This will allow you to fulfill your divorce settlement agreement.
  3. Pre-approval for Equity Buy-Out can help to avoid the need to go back to court due to the inability to meet the requirements of the settlement agreement.
  4. A pre-approval for Equity Buy-Out will give all parties confidence that they will be able to obtain mortgage financing after the divorce is over. It will also alleviate any fears of execution failure.
  5. A pre-approval for Equity Buy-Out provides both parties with the knowledge and information they need to make informed financial decisions and helps them plan for future home ownership.

What is the difference between prequalification or preapproval?

Prequalification is generally when a mortgage professional gathers basic financial information from the borrower in order to determine how much mortgage they can afford. Pre-approval goes one step further and verifies the financial information submitted to obtain a more precise amount. Pre-approval for an equity buyout is a better indicator of the spouse’s ability to afford the loan and gives the borrower more credibility.

Homeowners who have obtained an Equity Buy-out preapproval before the change in interest rate are advised to get an updated preapproval to ensure that they remain eligible for mortgage financing.

Because they have a better understanding of the whole divorce process, certified divorce lending professionals are a great asset to the team. Their understanding of the interplay of tax law, family law, and mortgage financing is what sets them apart from other basic mortgage professionals in the industry.

The key to a successful divorce settlement is the ability to put the pieces together so that both spouses are happy. Each member of the professional divorcing team should contribute value and perspective to the overall success of the divorce process.

For a copy of the Divorce Mortgage Homeowner’s Workbook, a guide to credit real-estate and mortgage financing following divorce, contact Richard Woodward today by completing the request below. This workbook will assist you in organizing, being prepared, and understanding your mortgage financing situation. It can help you decide if you need to refinance or purchase a new property after divorce.

Certified Divorce Lending ProfessionalThe certified divorce lender professional can help divorcing couples make an informed decision about their home equity. They also assist professionals in divorce today to identify potential conflicts between settlement and home equity solutions.


How I help Divorcing Couples Divide Equity up to 95% of the homes value.

What is an Owelty lien? Owelty liens are a type of deed that allows divorcing couples to divide the existing equity in the marital home. This action is commonly utilized in divorces to “buying out” the remaining spouses’ interest in a home.  A divorce refinance is our specialty.  The husband can refinance the house in his name or the wife can refinance in her name.  A refinance to remove a spouse is often required in the divorce decree.  Read more on this post. Texas Owelty liens 

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Nexa Mortgage - Richard Woodward
7820 Hague Ct
Plano, TX 75025
Phone: (214) 945-1066

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Richard Woodward
Branch Manager
NMLS #217454
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Company State License#
AZMB - 0944059
NMLS# 1660690

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