Many people may be aware of the fact that on a cash-out refinance generally a client can borrower up to 80% of their homes appraised value. When a divorce occurs often the spouse remaining in the home will need to pay fifty percent of the equity to their ex.

In a situation where the spouse staying in the home has plenty of equity they can often take additional equity to pay off other debt or complete home improvements while staying within the 80% guideline.

The great news is that in a divorce buyout situation if all the funds at closing are going to payoff the ex the lender will not consider this a cash-out refinance. In that scenario, you are not limited to an 80% loan-to-value.

A divorce buy out refinance allows you to borrow up to 95% of the appraised value. The lender will verify that all the funds at closing are going to the ex. The lender will verify this with the separation agreement or divorce decree.

The divorce buy out is a great program for clients who may not have much equity in the property at the time of divorce. This option may allow you to stay in your current home and start building equity in the future that is 100% yours.