Can a "no cash out" refinance be used to buy out the equity of an ex-spouse?

When the purpose of the new mortgage is to refinance an existing mortgage to buy out an existing title-holder’s equity, the specified equity to be paid is considered property-related indebtedness and eligible to be included in the new mortgage calculation. The Lender must obtain the divorce decree, settlement agreement, or other legally enforceable equity agreement to document the equity awarded to the title-holder.   

For additional information see Handbook 4000.1: II.A.8.d.vi.(A)(2)(b)(i) at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh


All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-04301