Divorce and how to buy out or split the equity in the marital home.
One spouse can buy the other spouse from the house they owned before marriage when the divorce decree states who will keep the house and how much equity will be divided. In other words, the existing spouse gives an offer to the remaining spouse, according to the current value of the home, to take their share of the home. If the other spouse agrees, they take the money and cede ownership of the home.
If the market value of the home is $800,000 and the mortgage debt is $400,000, each spouse will receive $200,000 in equity. If the divorce negotiations indicate that the equity is 50 divided / 50 or equally divided, the spouse who wishes to keep the house and not sell the other spouse must offer to pay them their part of the equity. This means that they will have to pay the cash value corresponding to the value of that equity.
The Richard Woodward Mortgage team has successfully helped hundreds of people divide the equity in their marital home all the way up to 95% of the homes appraised value. Many banks and credit unions will tell you this cannot happen, but it can. I can show you how and I have the tools and connections to make it happen. You are welcome to a free consultation to review your equity buyout or refinance options. You can book an appointment now on my calendar or call me at (214) 945-1066
If a spouse is unlikely to have enough cash to complete a buyout, other methods can be used. The receiving spouse can pay the equity owed with cash by refinancing the mortgage out of the joint indebtedness and trading other assets (such as pension funds, annuities or alimony) whose value is the sold shares of the spouse.
If the buyout involves paying a lump sum equal to their equity in the house to the other spouse, both spouses can make alternative arrangements to affect the total amount of buyouts. If the retaining spouse pays the money, the exiting spouse can refinance the house by taking out a new mortgage or waiving other marital properties worth their share. If a buyout occurs at a time when both spouses retain an interest in the property for a while, the agreement you make for it must be included in your divorce settlement agreement.
Refinance to access the equity
The first way I advise my clients is to divide the equity by refinancing the house and dividing the equity 50 / 50 if you are in a community property state. The other option is to sell the home and divide the proceeds according to the divorce decree.
However, if you want to keep your home, you may need to qualify for refinancing before the divorce is final. That is where I come in. As a Certified Divorce Lending Professional, I am well versed in all matters of mortgages and divorce. Don’t make the mistake of accepting the responsibility of retaining the mortgage and equity buyout without being prequalified. You can start the process now for free or just give me a call at (214) 945-1066.
A refinancing eliminates your ex-spouse’s name from the mortgage, meaning they won’t be held responsible for payments. In a refinancing you can cash in the equity you have accumulated and use it to buy out the existing spoused interest and responsibility.
Remember, the divorce decree only determines who will keep the home. The mortgage determines who’s credit will benefit or be harmed if someone is not making payments. That is why I would always insist on a mortgage refinance as soon as possible.
In most cases, you and your ex-spouse have equity if you both own the house. When you buy equity in a home, you have to pay off both for their share of the house. Bear in mind that the equity base depends on which state you live in and whether or not you had the house before you married, so you need a divorce lawyer to help you sort things out.
Another option is with a mortgage assumption. If the current mortgage is an FHA mortgage, it can be assumed by the remaining spouse if they can qualify. This however does require the remaining spouse to pay cash to the exiting spouse as the assumed loan terms are not changed, only the persons responsible for paying for it.
Texas is a Community Property State
Shared ownership means that most of the assets acquired by the spouses during the marriage belong to the joint property and are shared at the time of divorce. In short, the court will consider which party is best placed to take over the house and the payments themselves, and which party is better equipped to do so if there are children from the marriage who live with them in the first place. The court will not reach for a giant knife and split the house in half.
As discussed above, if a divorce party is able to make the house payments alone, it can stay in the family home until the divorce is finalized. As a result, anything is possible when it comes to the family. If possible, the children should stay with the family to minimize additional disturbances in their lives.
This happens when one party agrees to pay the other half of $150,000 to stay in the house. For example, if only $50,000 is left for the mortgage and the home is worth $200,000, both parties still have $75,000 in equity. The spouse who stays in the home must pay $75,000 in the existing home equity to the exiting spouse. If this scenario occurs, they will have to refinance the mortgage into a loan created in their individual name.
I have seen clients doing everything in their power to stay within their marital home. A former client of ours swapped 90% of his pension account for future spousal support payments in order to keep his marital home.
This goes back to my point in the opening of this blog post that people value homes differently. A person who is undergoing rapid change in their own life may want to make sure that their son remains in the house in which his son grew up. For a person undergoing rapid changes in their own lives, home can be a safe zone for them to feel comfortable and safe in.
Transferring a home from mutual ownership to sole ownership is not difficult but requires certain legal documents to be drawn up and filed with the clerk of the district where the family home is located. If you are thinking about a potential divorce, you should consult an experienced family lawyer to facilitate the transfer of the house. If neither spouse wants the marital home, the house must be sold and the proceeds of the sale divided according to the court order and the consent of the couples.
As you can see, once the divorce is finalized, the divorce party may be able to afford the mortgage payments themselves. This is particularly often the case with older divorce partners who have children at home and one spouse has not been working.
If the two married people can not stand to be in the same room, it will be nearly impossible for them to agree to the sale of the house. It will also be difficult for the two to agree on how to put their house up for sale and what steps to take. A family lawyer can create a language that becomes a court order with guidelines for the sale of a home. These guidelines include a timetable and instructions on how to pay for the proceeds of sale and how to distribute the money.