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Buying Out Spouse/Partner = Refi; Not Cash Out or Purchase

Buying Out Spouse/Partner = Refi; Not Cash Out or Purchase

We recently received the below email from a borrower who left us for what he thought was a lower rate. 

“Hi Casey, The other lending company fell through and couldn’t get us a loan in time. Their customer support was horrible and wouldn’t provide me with a direct answer.

We would like to see if we can restart this one. We did pay for an appraisal on the house which is attached. I don’t know if you can use it, but it was for $630,000.”

We were not able to use his appraisal too, so he was out $525…and a lot of wasted time.  We get emails like this every week.

BUYING OUT A PARTNER OR A SPOUSE

We were recently asked if a Residential Purchase Agreement is needed when a man buys out his ex-wife (who is on title with him).

The answer is no.

Whenever a person buys out a spouse or partner who is on title, lenders consider the transaction a “rate and term refinance,” as long as all net proceeds go to the partner who is getting bought out and deeding off title.

The “rate and term” refinance (instead of a “cash out” refinance) is an important distinction b/c it allows for much higher loan-to-value ratios and better rates.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 310167