What is an Owelty lien? Owelty liens are a type of deed that allows divorcing couples to divide the existing equity in the marital home. This action is commonly utilized in divorces to “buying out” the remaining spouses' interest in a home.  A divorce refinance is our specialty.  The husband can refinance the house in his name or the wife can refinance in her name.  A refinance to remove a spouse is often required in the divorce decree.

The party giving up their interest in the home obtains a lien against the property through a divorce decree, called an Owelty lien. The Owelty lien must be filed at the courthouse in the county records. When the party retaining their interest in the house refinances or sells the home, the other party is paid the value of their Owelty lien. This solution allows one person to obtain the full interest in the home while removing the exiting spouse from the mortgage, while also providing the exiting spouse with cash.  We can help you refinance without a spouse.

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Warning! Both parties need to plan and pre-qualify for a refinance if they wish to retain the property.  A refinance before a divorce is not recommended because the exiting spouse will remain on the loan until it is refinanced again or paid off which could lead to bad credit issues. Many times, one spouse cannot qualify for the mortgage on their own. Without proper planning BEFORE the divorce is filed the result could be devastating for both. Both spouses' credit could be ruined because the retaining spouse cannot refinance and the equity cannot be divided without a sale. Contact Richard Woodward, your Certified Divorce Lending Specialist for your initial consultation and complete explanation.

Owelty Liens FAQ
An owelty lien is a tool to utilize when the equity of a home needs to be split. Here are some helpful answers to frequently asked questions (FAQs) regarding an owelty lien:

What is an Owelty lien?
Owelty liens are a type of deed that allows divorcing couples to divide the existing equity in the marital home. This action is commonly utilized in divorces to “buying out” the remaining spouses’ interest in a home.

The party giving up their interest in the home obtains a lien against the property through a divorce decree, called an Owelty lien. The Owelty lien must be filed at the courthouse in the county records. When the party retaining their interest in the house refinances or sells the home, the other party is paid the value of their Owelty lien. This solution allows one person to obtain the full interest in the home while removing the exiting spouse from the mortgage, while also providing the exiting spouse with cash.

What is an Owelty lien in Texas?
In Texas, the Owelty lien is more valuable than any other state. It is the only way a divorcing couple can access more than 80% of the home current value without violating the Texas A6 law, or cashout law. Without the Owelty Lien, borrowers will pay cashout rates rather than the traditionally lower rate and term rates.

How would an Owelty lien work?
Here’s an example: Joan and Mike are going through a divorce. They own a home together with a mortgage. Their home is valued at $500,000 and the couple currently owe $300,000. Let’s assume they are splitting the equity 50/50 (or $100,000 each). Their divorce decree must specify the owelty and the owelty lien must be recorded. Joan would then refinance the property at $400,000: the $300,000 owed on the mortgage in addition to Mike’s $100,000 owelty lien. The end result is Mike gets his $100,000 and Joan is the full owner of the home. Mike is no longer on the mortgage nor the deed.

Can I just do a “cash out” refinance or Texas Home Equity Loan to get the money to pay off my ex?
Without an owelty lien, the parties would be limited to only cashing in on equity up to 80% of the value of the property under Texas Equity laws. The owelty lien allows the parties to recoup their equity up to 95% of the property’s value. This also allows the refinancing spouse to obtain a regular refinance which cost less. That is very important because it affords the borrower lower rates and better terms.

Why does my lender tell me I can not use a HELOC to pay off my ex's equity split from my divorce?
The use of an Owelty Lien is a little know procedure. Therefore most companies outside of Texas and inside of Texas for that matter are not familiar with Owelty Liens. Therefore, they will limit you to the Texas cashout refinance or A6 laws.

The Richard Woodward Mortgage team is a Certified Divorce Lending Professional and helps people with this type of refinance all the time.  Let the experts make it easy for you and call us today at (214) 945-1066.

 

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Is my ex entitled to half the equity?  In most cases, yes.  Especially in community property states like Texas.

How is equity paid out in a divorce?  An Owelty Lien refinance is the best way if one spouse wants to keep the home.

How do you calculate equity on a buyout?  Equity is equal to the loan balance minus the appraised value of the home.  Equity buyout is negotiable.  The terms of the division are normally spelled out in the divorce decree.

How do I buy my ex out of the house?  See above.

How do I buy out my partner?  See above.

Does a spouse have to agree to a buyout?  Yes, it is normally spelled out in the divorce decree, but it can also just get a written agreement between the parties.

How does one spouse buy out the other?  See above.

What is an equity buyout loan? It is basically a refinance to remove the exiting spouse from the current loan.  If the exiting spouse is not on a mortgage, then a HELOC would work too but normally that is limited to 80% of the home's value.

Can I afford to buy my husband out of the house?  That will be determined by your financial status.  We can help you determine that in hours.

Can you remove someone's name from a mortgage without refinancing? No.

What happens if a spouse cannot refinance after divorce?  This would make you in contempt of your divorce decree and subject to additional legal action.  To avoid this, get prequalified prior to the divorce.

How do I transfer a joint mortgage to one person? The only way is to refinance in most cases, FHA and VA will allow this to happen with a qualified assumption.

How do I buy my ex out of the house?  See above.