Archives for January 2022

Refinancing to Cash Out your Ex-Spouse

If you’re a homeowner who is going through a divorce or a dissolution of domestic partnership, there are some things to know about using the equity from your home to “cash out” your ex-spouse.

When someone uses a refinance to take equity out of home to provide to ex-spouse, lenders will make an exception and treat the transaction as a “limited cash-out” refinance instead of “cash out” refinance. This provides slightly better pricing with the interest rate and may allow for a higher loan amount, if needed.

In order to qualify for this exception, the following is needed:

  • parties must have jointly owned the home for at least 12 months;
  • copy of the filed separation agreement or divorce decree. The separation agreement or divorce decree need to include the property address, the amount if proceeds and that the proceeds are to be from refinancing;
  • copy of filed support order or parenting plan, if there are children who are minors;
  • either a deed will need to be prepared by an attorney or the ex will need to acknowledge a few documents, including the note and deed of trust, if they are staying on the title;
  • the party who is remaining on title must be able to qualify for the new mortgage.

In addition, for this to not be treated as a “cash out” refi, the homeowner is retaining the property cannot receive proceeds from the refinance.

The ex who is being cashed out will receive the funds directly from the escrow company after closing.

Alimony or child support may be used as income for qualifying if it is going to be paid for at least 36 months after closing the refinance.

One potential benefit for both parties when someone refinances due to divorce or dissolution is that it frees one of the parties from the existing mortgage. Although a divorce decree or separation agreement may state that one party is responsible for making payments on the mortgage, the decree or separation agreement does not remove the liability to the person who was not awarded the home as long as their name is still on the mortgage. If late payments are made, this may impact the credit scores any party who’s name is on the mortgage and may prevent the other party from being able to buy another home.

Of course, I’m not an attorney and this is not legal advice. If you are considering a divorce or separation, I strongly recommend contacting an attorney who specializes in this.

Mortgage Rates on the Rise

Mortgage interest rates have been pushing higher with the Fed pulling out of buying mortgage-backed securities and inflation. Check out Freddie Mac’s latest Prime Mortgage Market Survey that was published this morning.

From the PMMS:

“Mortgage rates rose across all mortgage loan types, with the 30-year fixed-rate mortgage increasing by almost a quarter of a percent from last week,” said Sam Khater, Freddie Mac’s Chief Economist. “This was driven by the prospect of a faster than expected tightening of monetary policy in response to continued inflation exacerbated by uncertainty in labor and supply chains. The rise in mortgage rates so far this year has not yet affected purchase demand, but given the fast pace of home price growth, it will likely dampen demand in the near future.”

Mortgage rates are still historically low… just not as “artificially sweet” as they have been due to the Fed’s support. If we continue to see signs of inflation, mortgage rates will most likely continue to trend higher.

If you are preapproved for a mortgage to buy a home, you may want to contact your mortgage professional to get an updated scenario with current rates. If you have been considering refinancing, you may want to make that move sooner than later. If your home is located anywhere in Washington state, where I’m licensed, I am happy to help you with your mortgage needs! Click here for a no-hassle mortgage rate quote.

Mortgage Rates for Second Homes and High Balance Mortgages are Going UP

The FHFA announced today that the pricing of mortgage interest rates for second homes or high balance mortgages will be more expensive. This impacts conventional mortgages (Fannie Mae and Freddie Mac) and is effective for loans that are delivered on or after April 1, 2022 – i.e. I expect to see the price increases to start happening soon. [Read more…]