Mortgage News and Notes

Divorce FAQ - Equity Buyouts

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.

This 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 me.

 

Margie Hofberg, President

Residential Mortgage Center

 

 

 

What is the difference between an equity buyout and a cash-out refinance - and why does it matter?

 

An 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.

Posted in:Divorce and tagged: DivorceFAQEquitybuyout
Posted by Steven Hofberg on May 31st, 2019 1:33 PM

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