Divorce Buyouts: Qualifying as a Non-Cash Out/Rate & Term Loan

Divorce is a challenging process, especially when it comes to dividing the family home. The good news? Both Fannie Mae and Freddie Mac allow divorce buyouts to be completed as a rate and term (non-cash out) refinance—if you meet certain criteria. This can save you money and make the transition smoother for both parties.

What Makes a Divorce Buyout Eligible?

• Legal Documentation: You must provide legal documents (like a divorce decree or settlement agreement) showing:
  • The ex-spouse will be removed from the title
  • The amount they are to receive from the refinance
• No Extra Cash Out: The spouse keeping the home is not paying off additional debts or getting cash out for anything other than the buyout amount.

Why Is This Important?

• Lower Rates and Costs: Rate and term refinances usually have lower interest rates and fees than cash-out loans.
• No 80% LTV Cap: Unlike cash-out loans, you can often go above 80% loan-to-value (LTV), ensuring your ex gets their fair share—even if there’s not a lot of equity.
• Clean Title Transfer: The ex-spouse is removed from the title at closing, while their equity is paid out from the new loan.

How It Works

1. Provide your lender with your divorce agreement and details of the buyout.
2. Apply for a rate and term refinance under Fannie or Freddie guidelines.
3. At closing, your ex is removed from the title, receives their portion, and you become the sole owner—without the higher rates or restrictions of a cash-out loan.

Need Guidance?

Navigating this process can feel overwhelming, but the Extreme Loans team is here to help. We’ll make sure your divorce buyout meets all requirements so you can move forward with confidence and peace of mind.

Questions? Call us at (844) 256-7332 or visit extremeloans.com to get started.