Divorce Owelty Process In 4 Stages

From Pre-Divorce Stage to Owelty Refinance Final Stage (leaving spouse receives equity money)

I’ve been handling divorce clients and helping them prepare for divorce as it relates to the family home for over 10 years; depending on the stage they contact me in, the process is always the same.  Many times, I’m contacted by one of the spouses before they have even talked to a Family Law/Divorce Attorney, and other times I’m contacted afterwards while the spouses are negotiating final outcomes of the divorce.  My suggestion is to contact me or another Divorce Lending Specialist before you meet with your attorney, so you can get an understanding of your options as it pertains to the home…typical loan officers at local banks are not always familiar with divorce options, and you are much better off not contacting your local bank, from my experiences.  This will simplify your process with your attorney in your first meeting.

Step One – Before Divorce Process Gets Underway

If you do NOT have any intentions to pay your leaving spouse their split of the equity of the home in cash, then contact your Divorce Lending Specialist, or me.  There are a number of ways you can buy them out without selling the home or paying them cash.  The most popular is using an owelty, and then refinancing the owelty after the divorce.  At this time, you will be educated on all the lending options and others that are available…which may include doing the owelty refinance, where you can get a loan amount up to 95% of the value of your property.  Texas Cashout Refinances are NOT the best option here, and they only allow up to 80% loan to value.  During this meeting it might be a good idea to get pre-approved for a certain amount so you know that you can get a loan to handle your buyout as well…you do not want to state in the divorce decree that you are going to pay off your spouse with in a couple months from the date of the final decree and then find out you cannot qualify for a refinance.  Knowing your options ahead of time helps you avoid common mistakes during divorce.

Step Two – Meet With Your Attorney or With Spouse

At this point, you will know your options and minimize your stress, and whether you are answering questions from your hired attorney or trying to work amicably with your spouse directly, you’ll be able to explain exactly what divorce option works best for you.  Also, your lender will have been able to take you through a question and answer sequence that also might provide you with a good idea of what your home is worth, so that you can begin to understand and negotiate about how much equity there is to split…sometimes one spouse may be better suited to take on a heavier load of the debts (things you owe money on like car notes and credit cards), and you might come to an agreement between one another that one person takes on more of the debts and therefore can/should receive/keep more of the equity in return (all of this is negotiable).

Step Three – Attorney (or spouses) Drafts and Finalizes Divorce Decree

It can take 1 month or as long as 3-4 months before you and your spouse come to an agreement on the final structure and negotiations of the Divorce Decree.  The Divorce Decree is the legal document that spells out all the responsibilies and such that each spouse is bound to by law after the divorce, and includes but is not limited to the home, children, and other debts.  You do NOT want to refinance the home to remove the leaving spouse from the title or note on the home, or to pay them their equity, until after the Divorce Decree is finalized and court stamped.  During the writing of the decree, the attorney does NOT need to mention the word owelty in the decree, but if they advise you to and want to put it in there, that is fine too.  As long as the Real Estate section of the decree has wording that explains how the equity is to be split, either by a percentage amount, or a given dollar amount, our title company involved in the final refinance of it all will draw up the owelty as part of the process of the refinance…this is typically not expensive at all.

Step 4 – Divorce Decree Finalized Through Payout of Leaving Spouse

Now, you have in your possession a final court stamped legal divorce decree.  In the decree it may state that you are to payout your leaving spouse by a certain date.  Typically, from start to finish at this point, we can refinance the home and payoff your spouse their portion of the equity within  30-35 days…most of the time the timeline that are in the decree to pay off the leaving spouse seems to be greater than 2 months, so there is usually no worries about this timeline.  You will fill out a mortgage application just like you were buying or refinancing a home, and submit your supporting income and asset documents with a copy of all pages of the divorce decree.  As your Divorce Lending Specialist in the refinance, we will order an appraisal, and order title work. In the request for title work to start the process, we will also request the draw up of your owelty, or owelty deed.  The owelty simply attaches your spouse to the property like a mortgage lien.  Before you sell the house or refinance, when a title company does their title search, it will tell the title company that the home cannot be sold or refinanced without paying a given amount of money to the spouse…just like a mortgage lien.  When the appraisal comes back, the owelty will already be done, and your refinance can be completed.  You will go to the title company to sign your closing documents just like a home purchase closing.  In Texas there is what is called a 3 day right of rescission, where you cannot fund your refinance until 3 business days after you sign.  During this time, the title company will get with your spouse to see how they want to receive their funds from the equity buyout…they can have the check mailed, pick it up at the title company, or wire it directly to their account.  On the forth business day after signing, the lender/us will send the funds to the title company and the title company will issue the money to the leaving spouse.  After this point, the leaving spouse is paid their equity, and taken off the title of the home, and if they were also on the current mortgage note, they will be removed from that too.

If you have more questions or want to have a free pre-divorce consultation with me, please call me at 469 450 2723. Or, you can Apply Online today for a free divorce lending pre-qulalification.