The Leaman Team with PrimeLending offers a loan product that can be advantageous for divorcing couples.
Austin Owlety Liens – Frequently Asked Questions (FAQ)
What is an Owelty Deed?
The Leaman Team can assist you with loans involving Owelty Deeds. Owelty deeds are a type of deed that allows the owner of a home to utilize the equity they have in the home to assist in dividing up their property. This action is commonly utilized in divorces or in “buying out” one party’s interest in a property which has been recently inherited by multiple people.
The party giving up their interest in the home obtains a lien against the property, through a contract or a divorce decree, called an Owelty. This Owelty is worked into the loan documents and when the party retaining their interest in the house refinances the home, the other party is paid the cash value of their lien. This solution allows one person to obtain the full interest in the home, while also providing the other person with cash.
How does an Owelty Lien work?
By making an Owelty lien part of a contract or divorce decree when someone is giving up his or her interest in a mutually owned property, each person benefits from his or her interest in the property. In a situation such as a divorce, this option can provide the moving party with cash for his or her own use.
An example would look like this: James and Jill are in the process of divorcing and have a home together for which they currently pay the mortgage. The divorce decree must indicate an Owelty and the party seeking the money must record the Owelty lien created by the decree. This home is valued at $200,000 and James and Jill have paid enough of the mortgage down to currently owe $180,000. Assume each party is entitled to half of the equity in the home, or in this case $10,000 each.
Without an Owelty, the parties would be limited to only cashing in on equity up to 80% of the value of the property under Texas Equity law. In this circumstance, the Parties could only cash in on equity under $160,000 and as they owe more than that, there is no possibility of funds being pulled out of the developed equity. An Owelty allows the parties to cash in on up to 95% of the equity on the property. If James were moving out, he would obtain a lien against the property through the divorce decree worth his amount of the equity, or $10,000, to secure his interest.
Jill would then refinance the property at $190,000, what is owed on the old mortgage in addition to the $10,000 lien, utilizing the equity available up to 95% of the value of the property, which would include paying James $10,000. The end result is James has his $10,000 and Jill is the full owner of the property they once shared.
What are the requirements for obtaining an Owelty Lien?
The documents creating the Owelty, such as a divorce decree, must be drawn correctly according to Texas Law. There are also FNMA and investor-specific requirements including that the person obtaining the refinance and paying off the Owelty must qualify for the refinance of the property on his or her own.
There also may be increased scrutiny resulting in pricing increases, based on the presence of any other type of lien on the property, such as tax liens, mechanics’ liens, and loans entirely used for home improvement but taken out after the purchase of the property. The property must have been jointly owned by the parties for at least 12 months prior to applying to refinance and the borrower also may not receive any cash in hand from closing.
These are just some of the basic requirements related to handling an Owelty through Primelending; there may be more specific requirements on a case-by-case basis.
If dividing a property utilizing an Owelty Deed interests you, please consult your attorney to make sure it is the best option for your individual circumstances. If you need a referral for an Austin divorce attorney, please contact The Leaman Team today.
Disclaimer: This description is for informational purposes only. For more information, please speak to your real estate, probate, or divorce attorney.
How do I qualify for a mortgage utilizing an Owelty Lien with PrimeLending?
There is no cost to apply for a mortgage utilizing an Owelty Lien with The Leaman Team. Call now – toll-free: (800) 301-3405 or email Team@MaxLeaman.com.