Trapped Out of Owelty Refinance Options
The right divorce attorney SHOULD problem solve you through this part before they finalize your divorce decree to protect you from being trapped into an option you never intended, but many do not…I am unsure many even remember from school what an owelty loan is. Specializing as a CDLP (Certified Divorce Lending Professional), I try to team up with attorneys to help them avoid setting their client into the “trap”, but disappointing as it may be, many simply just do not care about their clients enough to problem solve them through this part. In this post, I’m going to tell you what to do to avoid getting caught in the accidental trap un-knowingly set by an underachieving divorce attorney. Again, it’s all about knowing your options, and putting yourself in position through planning to capitalize on the best option for you.
Preparing For Owelty Refinance – Trap 1 to Avoid
Say you are considering divorce, whether you have talked to an attorney yet or not, and you are expecting to keep the house, while your soon-to-be x-spouse will be moving out. Your intentions are to pay your leaving spouse their portion of equity through an owelty loan refinance. Briefly explained, we use an owelty to represent the amount a leaving spouse is owed of the equity in the primary home after divorce. Whether you currently have a mortgage on the home or not, I can do a regular refinance of your house to pay off the loan you may currently have on your house, PLUS the equity you owe your leaving spouse.
Random calls from people reading my blog and viewing my youtube channel about owelty refinancing come in all the time where it is written in their divorce decree that after the divorce is final, they are required to either sell the home and split the equity/profit with the leaving spouse or refinance and give them the money. Where the problem lies is when the person keeping the house did not do the due diligence for themselves, and the attorney didn’t advise them to do so, to make sure they can be approved for such a loan. You intended on keeping the house, and maybe even raising your kids their and keeping them in the same school, “yada yada yada.” Now since you can’t qualify to refinance and do not have the cash to pay your x-spouse, the law (per the divorce decree) requires you to sell your home. You are trapped into an option you never intended! You do not want to sell your home but have no other choice. Call me to apply for preapproval before you meet with your attorney, or at least after you have met with your attorney but before they finalize the divorce decree.
Getting X-Spouse off Current Mortgage or Title – Avoiding Trap 2
In this example, let’s say you are the leaving spouse. In the divorce decree, it is written that upon final divorce, the spouse keeping the home is required to refinance the primary residence to take the leaving spouse’s name off the mortgage and title. Keep in mind, I am not an attorney, I do not practice as an attorney, and I have never attempted to practice or pass the BAR. My advice during divorce conversations is only directed toward options and advice regarding loan options revolving around the outcome of divorce. The problem is, it is written in the divorce decree that they are supposed to refinance to get the leaving spouse off the mortgage, but the spouse keeping the house cannot get approved for a refinance. As a result, the leaving spouse still shows this mortgage on their credit and they do not qualify for a new mortgage with the credit issues showing up from the mortgage on the previous house. The leaving spouse is trying to start a new life and buy a home and cannot because of this. The spouse keeping the house refuses to do anything, and what most people tell me is they do not want to pay an attorney to force the other spouse to sell the home since they cannot refinance, and the leaving spouse is stuck on the mortgage indefinitely.
That is trap number 2 to avoid: If you are the leaving spouse, make sure your soon-to-be x-spouse calls me and gets preapproved BEFORE it is too late, and YOU are trapped.
How to Avoid the Owelty/Refinance After Divorce Trap?
Do not be lazy! I cannot speak for other lenders, but at Premier Nationwide Lending, there is no cost to apply for a preapproval and the process is quick. If you are the spouse leaving the house, force your soon to be x-spouse to call me and get preapproved BEFORE you sign the final divorce decree. OR, if you are the spouse keeping the house and do not want to be forced to sell the house if you cannot pay the buyout of your x-spouse after divorce, call me to get preapproved BEFORE you sign the final divorce decree.
Leave a Reply