As a Certified Divorce Lending Professional, I recognize that when it comes to real estate, buyouts come with complex financial scenarios. Whether it’s dividing property among heirs, settling divorces, or restructuring ownership, it comes down to distributing that equity. The Owelty Loan is a tool for all such transactions. Let’s delve into what Owelty loans are and how they offer a strategic approach to real estate buyouts.
Understanding Owelty Loans: You can get a very layman version of what an owelty is and it’s definition at my previous post, Understanding Owelty in Texas Divorce: A Financial Solution for Property Division. The most important part for this post is that it allows one party to buy out another’s interest in a property without the need to sell it. Instead, the buyer retains ownership while compensating the “leaving” party for their share of equity.
Mechanics of Owelty Loans: Owelty loans are secured by a lien against the property being bought out. The lien ensures that the leaving party receives their agreed-upon share of the property’s equity as compensation. This compensation is in the form of cash typically when I am working with a client, but it could be a promissory note, or other assets, depending on the agreement. Watch this very short video to learn how a leaving spouse cashes out in a buyout after this refinance process.
Applications of Owelty Loans:
- Divorce Settlements: In divorce cases where one spouse wishes to retain the marital home, an Owelty loan can be used to buy out the other spouse’s interest in the property. If the spouse keeping the house does not have the cash to payoff the leaving spouse, I refinance the owelty and at closing it pays the leaving spouse. Even if there is a mortgage already on the property. (Call me with questions: 469-450-2723)
- Inheritance Division: When multiple heirs inherit a property, an Owelty loan can facilitate the fair distribution of assets by allowing one heir to buy out the others.
- Property Partition: In situations where co-owners wish to dissolve their ownership interests, an Owelty loan can enable one party to acquire sole ownership while compensating the other co-owners for their share.
Benefit of Owelty Loans:
- Maintaining Ownership: Owelty loans allow one party to retain ownership of a property while fairly compensating others for their equity.
- there are other benefits, but in my business as a mortgage loan officer, this is my focus
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