Divorce is a life event that unfortunately can happen. It certainly is not something you planed on or prepared for when you got married. When the divorce process starts emotions can be high. When owning a Texas home the future ownership of the property will need to be addressed. You need someone in the mortgage industry that has the experience to help you through this transition. Most Loan Officers are not prepared and don’t specialize in this area. If jointly owned property is located in Texas, and the Loan Officer is not, that person may not be aware of the unique Texas laws around divorce.
Todd Frank is a Texas Mortgage Banker that specializes in Divorce Lending. He can help you navigate the mortgage issues related with a divorce while satisfying the property directives in the divorce decree. Todd can and often has helped both sides of the transaction. Many of the same documents will be used in each spouse’s transaction whether for an Owelty Refinance or a departing spouse purchasing a new home. This can ultimately make for a smoother loan process for all parties. There is no bias in working with both parties.
Understanding Your Mortgage Options
The home is usually the largest asset that must be divided. The divorce decree will specify the division of the equity and which spouse is responsible for the home loan (mortgage) liability that remains. If both spouses signed on the original loan documents then they are both responsible and obligated until the note is paid off. The divorce decree alone doesn’t remove the financial obligation you have to a current lender. There are the options for removing ones liability or a spouse from a jointly obligated mortgage.
Refinance the Mortgage: This would be the most common option and where Todd is an expert. This option is used when one spouse will retain the property and the other spouse will be removed from loan obligation. Typically a Owelty Lien is created with the divorce decree and is important in Texas Divorce Lending. A Owelty Lien is a way to avoid selling a home while giving each spouse with what was awarded to them in the divource decree. An Owelty Lien will allow for lending up to 95% of the home’s value when paying out the departing spouse without the loan being subject to Texas Equity Laws which limits loans to 80% of the home’s value.
Selling the Home: This would be the simple process of removing liability. After paying off the existing liens on the home the parties can split the proceeds.
Assume the Mortgage: This is an option where one spouse takes over the current loan obligation in an assumable loan. The spouse keeping the loan will assume the remaining mortgage balance with the terms of the current home loan. It is important to know that not all home loans are assumable. You would have to contact the current lender to see if they will allow for an assumption. You will still need to qualify with the lender as in a traditional loan to determine your ability to repay the current debt.
Doing nothing and keeping the existing mortgage in place is an option but not wise. If the spouse keeping the home failed to make payments your credit will be impacted with the adverse information.
Frequently Asked Questions
Can I start the refinance before my divorce is finalized? Yes, but you can’t close until you have the final divorce decree. You also don’t want to lock an interest rate until the decree is finalized.
If my current loan has is over 80% of the value can I still do a Owelty refiance? Yes
Can I take additional cash out while I am doing a Owelty refinance. No. The Owelty transaction is similar to a rate and term refinance. You can roll in all the costs for the loan so no funds are needed from you at closing. However, trying to take out additional cash will subject you to the Texas Equity Laws as well as pricing associated with loans classified as such.
Are the interest rates increased when doing a Owelty refinance? No
Will I be able to remove my spouse with the Owiley refinance? Yes
Do you have more questions or need more details?
Contact Todd Frank Today!
Bank of Texas - Long live your money
2901 North Dallas Parkway, Suite 100, Plano, TX 75093