May 31st, 2019 1:33 PM by Steven Hofberg
Divorce FAQ is a periodic newsletter by RMC with answers to specific questions on mortgages for separating or divorcing couples.
month’s question is about the difference between an equity buyout and a
cash-out refinance. If you have a client with similar questions, I would be
happy to speak to you or your client. Please feel free to contact
is the difference between an equity buyout and a cash-out refinance - and
why does it matter?
equity buyout is a refinance where all the proceeds of the new mortgage go
to paying off the existing mortgage, closing costs, and money to the
leaving spouse as specified in a separation agreement or court
order. None of the proceeds can go to the borrower. This is very
important since a cash-out refinance can be priced from one-eighth to a
half of a percent higher in rate, depending on credit score and
loan-to-value ratio. For this reason, structuring the separation
agreement to reflect the equity buyout can be extremely helpful to the
client who will be taking on a refinance.