Breaking Up (Is Subject to Guidelines and Restrictions)

Mortgage and Lending with Guaranteed Rate, Marin County, CA NMLS: 22343

Breaking Up (Is Subject to Guidelines and Restrictions)


When we look at our refinance business, not a small percentage of it is driven by the scenarios where one spouse buys out the equity of the other, as stipulated in a divorce decree.  Sometimes when we are presented with a divorce buyout refinance we have to educate all the parties to the transaction on how to navigate the lending guidelines that govern these situations and, as you might expect, divorce buyouts are often done in a stressful environment.  So for those who may be looking to get an overview and understanding of the process, I hope that the key points below will help to reduce the friction that may already exist during this most difficult of periods in a relationship's life.


"A man in love is not complete until he is married.  Then he is finished." 

There are only three marital statuses on the loan application (married, unmarried and separated), and yes, you have to pick one.  If any borrower is still married when he/she attempts to refinance then the application and closing must, in some way, involve the other spouse and that person's ownership rights.  Refinancing at this time would not technically be considered a "buy out" because the parties are still married.  If a borrower, on the other hand, is separated it can also be very complicated to complete any mortgage transaction because the final status of the divorce, the disposition of assets and the obligations of child support and alimony may not be known or enforceable.  A final divorce decree is needed to dictate the rights of both spouses and their roles in relation to the buyout transaction.


"I was always a good housekeeper.  Whenever I divorced I kept the house."

We, in the lending industry, can consider a buyout refinance as a "rate and term" refinance.  Whoa, whoa, whoa --- I thought you were going to spare us the lender lingo, Rob.  OK, in layperson's terms all we mean by this is that the loan terms will be more favorable; the loan-to-value (LTV) can go higher, the pricing will most often be better and the restrictions will be fewer.  A rate and term refinance is
contrasted by a "cash out" refinance and believe it or not, there are still a great number of mortgage loan originators who will treat a true divorce buyout as a cash out refinance, much to the detriment of their clients.  Now you do need to realize that in order to keep the rate/term piece in place, the lender is going to want to know that the home in question was jointly owned for at least the previous 12 months (there are instances of exception), so it is with deep regrets that any and all Britney Spears-esque marriages will not stand this test of time.


"I never hated a man enough to give him his diamonds back."

The borrower who is refinancing the home may not receive any of the proceeds of the "cash out."  That is, the equity being liquidated via the refinance must go exclusively to the spouse coming off the title and/or loan, and as stipulated by the divorce decree.


"How many husbands have I had?  You mean apart from my own?"

Lastly, the borrower who is not being bought out and who is retaining the home must qualify exclusively for the new loan, which will be greater in size than the existing mortgage (if one exists).  A lot of confusion can swirl around this point, but know that it is possible for the borrower to add another applicant at this time.  And last but not least, a refinance of this nature removes the spouse being bought out from any existing loan itself, thereby releasing that person's contractual obligation to make future loan payments.


While Zsa Zsa Gabor, in her extensive experience, was able to find humor in divorce situations, most other homeowners do not.  This is precisely why an understanding of these industry standards and guidelines can help ease the stress of dividing real property in any marital settlement.  We are here to consult with you and your legal counsel, if necessary, and to make breaking up a little less difficult to do.


'Till death do us part, 



Robert J. Spinosa
Executive Loan Advisor
NMLS: 22343 CalBRE: 01297944
Cell: 415-367-5959 Fax: 415-366-1590 
1058 Redwood Highway, Frontage Road, Mill Valley, CA 94941


RPM Mortgage, Inc. – NMLS#9472 – Licensed by the Department of Business Oversight under the Residential Mortgage Lending Act. Equal Housing Opportunity.


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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Great post Rob and good job explaining some of the intricacies that we look at when helping folks through financing amidst a divorce.  Having that decree and any supporting docs re: alimony, child support, etc, is a huge help in making it a streamlined process.

Feb 02, 2017 10:19 AM #6
Wayne L. Brown
Franklin Advantage Inc. - Alpine, CA

I've handled a few of these over the course of my career.

They can often be stressful even for the LO with the pressures of divorcing couples.

These transactions require "Treading Lightly".

Feb 02, 2017 10:36 AM #7
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Rob - Working with a divorcing couple is always a challenge, and much of the stress comes from financial issues. This is good information - thanks, although I'm not really looking forward to having to use it.

Feb 02, 2017 10:53 AM #8
Nina Hollander
RE/MAX Executive | Charlotte, NC - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Great post. I literally got a phone call 10 minutes before I read it from a client who is separating from her husband asking about next steps.

Feb 02, 2017 11:15 AM #9
Margaret Goss
Baird & Warner Real Estate - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

Very well done and explained.  I loved Zsa Zsa's quotes - you made a weighty subject fun to read.

Feb 02, 2017 12:41 PM #10
Kasey & John Boles
Jon Gosche Real Estate, LLC - - Boise, ID
Boise & Meridian, ID Ada/Canyon/Gem/Boise Counties

Interesting. We work with clients who are divorcing but I am generally not involved in any divorce refi's. I didn't know these restrictions and guidelines. -Kasey

Feb 02, 2017 01:33 PM #11
Anna Banana Kruchten CRB, CRS, Broker
Phoenix Property Shoppe - Phoenix, AZ
Arizona's Top Banana of Real Estate!

Rob very creative and clever post. You kept me reading and I'm sure many divorcing folks will appreciate this helpful information and clarification.  Really good post!

Feb 02, 2017 03:39 PM #12
Libby Cousins
Extraordinary Processing - Spokane, WA
Contract Mortgage Processor, licensed in WA

Great explanation of refinancing an ex off of a loan. I think a lot of us in the mortgage industry take the information for granted and it is a great post for someone attempting to go through the process.

Feb 02, 2017 03:56 PM #13
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Rob have not seen you in a while, Happy New Year, you really know how to come back with a Bang:)) Congratulations on your Feature:))Endre

Feb 02, 2017 09:59 PM #14
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Rob, been there!  Done that!  This is a great explanation of what can be a complicated situation.

Feb 02, 2017 10:06 PM #15
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Rob Spinosa - I remember that difference between the words 'Completed' and 'Finished'.

At times, I feel, we can make life as much complicated as it can be, isn't it?

Feb 02, 2017 11:38 PM #16
Dorie Dillard
Coldwell Banker United Realtors® ~ 512.346.1799 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good morning Rob Spinosa ,

So glad to see this post featured..well deserved! I enjoyed the levity that you brought to a very serious and  many times misunderstood subject. Very well done and explained. Understanding and knowing how the financial aspect of your shared home, when you are divorcing, is all going to play out will serve both parties well. 

Feb 03, 2017 04:43 AM #17
Nathan Gesner
American West Realty & Management - Cody, WY
Broker / Property Manager

This article was very informative, and entertaining. Nice job!

Feb 03, 2017 06:07 AM #18
Carol Lynn Johnson
Re/Max Elite Realty - Franklin, NC
Residential Specialist

I recall years ago having a buyer who told me and told the lender and told the closing attorney he was single.  In fact, he was still married but in process of a nasty the closing table, he made a comment that made us all stop in our tracks.......the closing never happened.  Lesson learned.

Feb 03, 2017 09:31 AM #19
John Wiley
Right Move Real Estate Group- EXP Realty - Fort Myers, FL
Lee County, FL Real Estate GRI, SRES,GREEN,PSA

Very important information. I work with Real Estate Divorcing and find that many Attorneys and Financial Planners are not up to date on all the ramifications divorce has on real estate transaction. The result is that many leave money on the table. Also, having a lender that is up to speed on the topic is very unusual but very welcomed.

Thanks for sharing.

Feb 03, 2017 10:02 AM #20
Karen Deis - Minneapolis, MN
When In-house training is not enough!

Great post, Love the quotes. and there are even more rules when trying to buy a home and the divorce has not been finalized yet.  


Feb 03, 2017 10:14 AM #21
Jim Paulson
Progressive Realty (Boise Idaho) - Boise, ID

This reminded me about Zsa Zsa Gabor who was married nine times. She often told a joke about her marriages and her special housekeeping ability: 

“I’m a wonderful housekeeper. Every time I’m divorced, I keep the house.” 

Feb 03, 2017 04:18 PM #22
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Excellent post about the legalities of divorce, marital status, and outcomes.  Definitely going to G+ this one!

Feb 05, 2017 11:13 AM #23
Mary Jo Quay
Remax Results - Edina, MN

It's not particularly profitabale for lenders, but another option is for one party to assume the total loan.  Of course they do need to qualify. 

Feb 06, 2017 04:13 PM #24
Mick Michaud
Distinctly Texas Lifestyle Properties, LLC Office:682/498-3107 - Granbury, TX
Your Texas Lifestyle is Here!

A tough line of business to be in .  Divorce is generally ugly, as I can personally testify to. 


Mar 03, 2017 10:02 PM #25
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Rob Spinosa

Vice President of Mortgage Lending, Marin County
Can I Get a Jumbo Loan with 10% Down?
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