One of the most common questions couples ask is how the primary home of the parties will be split up. For example, Frank and Sara had been married 20 years at the time of their divorce. During the early years of their marriage they bought a home together. Both are 50/50 owners and on the home loan. Now they want to know how to split the home at divorce but they have some questions.
- Sara cannot get approved on the loan with her income – Sara wants to keep the home but her credit score is not high enough to refinance in her own name at this time.
- Frank Doesn’t Want to be on the Loan – Frank wants Sara to have the home but he doesn’t want his name on the loan.
- Frank Needs Money to Move on With His Life – Frank also needs money right now to be able to move out and get his own place.
- Selling in the Market is Out of Question Due to Poor Economy – The economy has taken a downturn and the couple cannot sell the house in the market.
Solution – Owelty Lien – An owelty lien is a tool utilized when the equity in a home needs to be split. It is commonly used in divorces or in “buying out” one party’s interest in the property.
Simply defined owelty means equity. It creates a way for a party to retain its interest in the home as a lien until the other party refinances. Once an owelty lien is created, it is recorded in the county property records.
In our case, Frank’s attorney would create an owelty lien in the house for Frank’s 50% share. Sara doesn’t need to refinance in her name immediately. When Sara’s credit improves and she refinances, Frank would get cash for his lien.
But Frank needs money immediately to move out. This problem is solved too. Frank can show the owelty lien as an asset and a bank will consider the lien to approve a home loan for Frank.
If you are going through a divorce with a house involved, talk to an licensed attorney about your case. Contact us today to schedule your consultation.