Person at home with iQRATE Mortgages refinance document.

How to Refinance in Nevada to Buy Out Your Spouse

Q: What is a buyout refinance in the context of a divorce?

A lender's seasoning period is a mandatory waiting time after you purchase or refinance a property before you can access the full after-repair value (ARV) for a cash-out refinance. Most DSCR lenders require a seasoning period of 6 to 12 months. Refinancing before the seasoning period concludes typically means the lender will base the loan amount on your original purchase price plus rehab costs, which severely limits the amount of equity you can cash out. Waiting until after the period allows you to borrow against the full market value you created through your renovations.

Q: What legal paperwork is necessary to apply for a divorce buyout refinance?

To justify a higher appraised value, you should provide the appraiser with a detailed and organized renovation packet. This packet removes guesswork and provides concrete evidence of the work performed. It should include: a cover letter summarizing the major upgrades, a detailed scope of work document itemizing all improvements, compelling before-and-after photos showing the property's transformation, copies of paid invoices and receipts for materials and labor, and copies of any official building permits that were issued for the work.

Q: How is the new loan amount for a buyout refinance determined?

No, LTV limits for cash-out refinances vary significantly among different DSCR lenders, as each has its own guidelines and risk tolerance. While purchase loans may reach 80% LTV, cash-out refinances are often capped at 70% or 75% LTV. The specific LTV offered to an investor is influenced by several factors, including: Credit Score (higher scores typically qualify for higher LTVs), DSCR Ratio (a stronger income-to-debt ratio may result in a better LTV offer), Property Type (a single-family home might receive a higher LTV than a multi-unit property), and Loan Amount (some lenders may offer different terms based on the size of the loan).

Q: What are the key financial factors a lender considers for a buyout refinance?

Your property's monthly rental income is the foundation of a DSCR loan approval. The formula is: DSCR = Gross Rental Income / Total Monthly Housing Payment. A higher rent results in a higher DSCR. This proves to the lender that the property can comfortably support a larger loan payment, which in turn allows you to qualify for a larger loan amount and maximize your cash-out.

Q: Can I use alimony or child support as income to qualify for the loan?

Yes, it is often possible to pay for closing costs with the proceeds from your new loan, meaning you don't need to bring cash to closing. However, these costs are not added on top of your loan limit. Instead, the closing costs are subtracted from the total cash-out funds available to you after your existing mortgage is paid off. The total loan amount, including these costs, cannot exceed the lender's maximum LTV limit based on the property's appraised value.

Q: What are the common reasons a buyout refinance application might be denied?

Investors can make several avoidable errors that reduce their available cash-out funds. The most common mistakes include: Poor Documentation (failing to provide an appraiser with a thorough renovation packet can lead to a conservative and lower valuation), Refinancing Too Soon (not waiting for the lender's seasoning period to expire is a costly mistake that forces the loan to be based on cost rather than value), Lacking a Tenant (attempting to refinance a vacant property is less favorable, as lenders prefer the security of a signed lease over estimated market rents), and Ignoring Lender Differences (accepting the first loan offer without comparing options can mean missing out on better LTV limits or shorter seasoning requirements from other lenders).

Q: What happens to the original mortgage and property title after a buyout refinance?

The ideal time to begin the refinance process is 30 to 45 days before your lender's seasoning period expires. This allows you to gather all necessary documentation, secure an appraisal, and complete underwriting so that you can close immediately once the seasoning requirement is met. Crucially, by this time, the property should also be 'stabilized,' which means you have a qualified tenant in place with a signed lease and have collected at least the first month's rent.

Specialized In Jumbo Loans, Investor Loans, DSCR Loans, Non-QM Financing, Commercial Mortgages, and Tax-Informed Lending Strategies

Published By

David Ghazaryan

Owner / Broker / Banker

Contact Me At

(702) 766-3744

NMLS 1486726

Let's Connect

TL;DR

A buyout refinance is a specific type of loan used during a divorce that allows one person to keep the marital home.
It works by securing a new mortgage in your name alone, which is large enough to pay off the previous joint loan and provide your ex-spouse with their court-ordered share of the home's equity.
Lenders will not consider an application without a finalized legal document, such as a divorce decree or marital settlement agreement, that clearly outlines the terms of the asset division.
Qualifying for the new, larger mortgage depends entirely on your individual financial profile, including your income, credit history, and overall debt, as assessed by the lender.
A professional appraisal is required to establish the home's current market value, which is the basis for calculating the total equity to be divided between you and your former spouse.

Understanding a Buyout Refinance in a Nevada Divorce

Navigating a divorce is emotionally and financially taxing, and the marital home is often the largest and most sentimental asset to divide. If you wish to remain in your home, a buyout refinance is a common solution. This isn't a typical refinance; it's a specific transaction designed to settle a division of assets.

Here’s how it works: You apply for a new mortgage on the property under your name only. The new loan is large enough to pay off the existing mortgage balance plus provide you with enough cash to pay your ex-spouse their share of the home's equity. Once the refinance is complete, the original mortgage is closed, your ex-spouse is removed from the property title, and you become the sole owner with a new mortgage in your name.

Many lenders view this transaction, often called an 'equity buyout', more favorably than a standard cash-out refinance. In a typical cash-out, lenders may limit how much you can borrow to 80% of the home's value. However, for a divorce buyout, some loan programs may allow you to borrow up to 95% of the home's value, recognizing that the funds are not for personal use but to satisfy a legal obligation. (The data, information, or policy mentioned here may vary over time.)

The Goal of the Buyout

The primary objectives of a divorce buyout refinance are to:

Remove the departing spouse from the mortgage liability. This is crucial for their financial future, as it frees them up to qualify for their own loans.
Remove the departing spouse from the property title. This legally transfers full ownership to you.
Provide the departing spouse with their court-ordered share of the equity in a single, lump-sum payment.

The Critical Legal Document: Your Separation Agreement

A lender will not move forward with a buyout refinance application without a legally binding document that outlines the division of assets. You cannot simply have a verbal agreement with your ex-spouse.

The required document is typically one of the following:

A Final Divorce Decree: This is the court's official judgment that terminates the marriage and includes the terms of the settlement.
A Marital Settlement Agreement: This legal contract, often incorporated into the divorce decree, details how all assets, including the house and equity, will be divided.
A Legal Separation Agreement: If you are legally separated but not yet divorced, this document can also suffice if it clearly dictates the terms of the buyout.

Signing legal documents for a home buyout during a divorce

The lender needs this document to verify the specific amount of equity you are required to pay your ex-spouse. It protects all parties by creating a clear, legally enforceable paper trail. The agreement must explicitly state:

That one spouse is relinquishing their ownership interest in the property.
The exact dollar amount or percentage of equity the departing spouse is entitled to receive.
The deadline by which the buyout must be completed.

Without this finalized document, a lender has no way to confirm the terms of the transaction and will put your application on hold.

Calculating the Buyout and New Loan Amount

Determining the new loan amount is a straightforward mathematical process. It involves the home's current market value, the remaining mortgage balance, and the equity division terms from your divorce decree.

Step 1: Determine the Home's Value Your lender will order a professional appraisal to establish the fair market value of your home. Let's say the appraisal confirms your Nevada home is worth $550,000.

Step 2: Calculate Total Equity Subtract the outstanding mortgage balance from the home's appraised value. If you still owe $300,000 on your mortgage, your total equity is:

$550,000 (Appraised Value) - $300,000 (Mortgage Balance) = $250,000 (Total Equity)

Person calculating home equity and mortgage payments

Step 3: Determine the Buyout Amount Your divorce decree will specify how the equity is split. Most commonly, it's a 50/50 division. In this case, your ex-spouse is entitled to half of the total equity:

$250,000 (Total Equity) / 2 = $125,000 (Buyout Amount)

Step 4: Calculate the New Loan Amount Your new mortgage must cover the original loan balance plus the buyout amount paid to your spouse. You may also roll in closing costs.

$300,000 (Original Mortgage) + $125,000 (Spouse's Equity Share) = $425,000 (New Base Loan Amount)

Closing costs typically range from 2-5% of the loan amount. (The data, information, or policy mentioned here may vary over time.) If we estimate costs at $8,500, your total new mortgage would be approximately $433,500.

Qualifying for the Mortgage on a Single Income

This is the most significant hurdle for many people. When you first bought the home, the lender likely qualified you based on two incomes. Now, you must prove you can handle the new, larger mortgage payment on your own.

Lenders will scrutinize your financial profile, focusing on three key areas:

Income and Employment: You need to show stable, consistent, and sufficient income to cover the new housing payment and all other debts. Lenders will verify at least two years of employment history, typically through pay stubs, W-2s, and tax returns.
Credit Score: Your credit history is a major factor. The stress of a divorce can sometimes lead to late payments or increased credit card debt, which can lower your score. Most loan programs require a minimum credit score, often in the mid-600s or higher, to secure a good interest rate. (The data, information, or policy mentioned here may vary over time.)
Debt-to-Income (DTI) Ratio: This is a critical calculation. Your DTI is the percentage of your gross monthly income that goes toward paying all of your monthly debt obligations, including the proposed new mortgage payment. Most lenders prefer a DTI ratio of 43% or lower, though some programs may allow for a slightly higher ratio if you have strong compensating factors like a high credit score or significant cash reserves. (The data, information, or policy mentioned here may vary over time.)

For example, if your gross monthly income is $8,000, and your new mortgage payment (including taxes and insurance) is $2,800, plus a $400 car payment and a $200 student loan payment, your total monthly debt is $3,400. Your DTI would be $3,400 / $8,000 = 42.5%.

Using Alimony or Child Support as Income

If you receive alimony or child support, you can often use it as qualifying income for your refinance, which can be a huge help in meeting DTI requirements. However, lenders have strict documentation rules.

You must provide:

The Full Divorce Decree or Settlement Agreement: The document must clearly state the amount of the payments and the duration for which they will be received.
Proof of Receipt: You must show evidence that you have been receiving full, timely payments for a set period, usually the most recent three to six months. (The data, information, or policy mentioned here may vary over time.) This is typically proven with bank statements showing the deposits.
Continuance: The payments must be scheduled to continue for at least three years after the mortgage closing date. (The data, information, or policy mentioned here may vary over time.) If child support payments will end in two years when a child turns 18, for instance, a lender cannot count that income.

It's important to note that the paying spouse must also be financially capable of making these payments, and the lender may verify this.

Common Reasons for Denial in a Nevada Buyout

Even with a solid plan, a buyout refinance can be denied. The most common reasons include:

Insufficient Income: Your DTI ratio is too high to support the new mortgage payment on your sole income.
Low Appraised Value: The appraisal comes in lower than expected, meaning there isn't enough equity to pay off the old loan and the required buyout amount.
Poor Credit: A credit score that has dropped due to divorce-related financial strain may disqualify you or lead to a very high interest rate.
Incomplete Legal Paperwork: The divorce decree is not finalized, or the settlement agreement is ambiguous about the equity division.
Irregular Alimony/Child Support Payments: If you can't show a stable history of receiving court-ordered support, the lender will not count it as income.

Alternatives to a Full Refinance Buyout

If you find you can't qualify for a buyout refinance, you still have options.

Sell the Home: This is the most common alternative. You and your ex-spouse sell the property, pay off the existing mortgage and any selling costs, and split the remaining proceeds according to your settlement agreement.
Owelty Lien: This is a legal tool specifically designed for dividing property equity. An owelty lien is placed on the property, creating a secured debt for the amount owed to the departing spouse. This can sometimes make it easier to secure a refinance because it formally structures the equity payment as part of the transaction. It's particularly useful in states like Nevada that recognize community property.
Continued Co-Ownership: While rare, some amicable divorced couples choose to continue owning the home together, especially if children are involved and they want to maintain stability. This requires a separate legal agreement outlining responsibilities for payments, maintenance, and the terms of a future sale.

What Happens to the Original Mortgage?

This is a critical point of clarification. The buyout refinance pays off and closes the original joint mortgage entirely. It is not a modification or assumption. The funds from your new loan are first used to satisfy the old loan, and then the remaining cash is disbursed to your ex-spouse for their equity share.

At the closing of the refinance, a Quitclaim Deed is typically signed by your ex-spouse. This legal document formally transfers their ownership interest to you. Once the refinance is complete and the deed is recorded, you are the sole owner of the property and solely responsible for the new mortgage. Your ex-spouse is completely free of the previous financial obligation, allowing both of you to move forward independently. Navigating a buyout refinance requires careful financial planning and a clear understanding of the legal steps involved. If you are exploring your options in Nevada, speaking with a mortgage strategist can help you assess your qualifications, understand the required documentation, and find the right loan for your new beginning.

Ready to secure your home and begin your next chapter? A buyout refinance can be complex, but you don't have to navigate it alone. Apply now to explore your options and get the clear guidance you need.

Author Bio

David Ghazaryan is the expert mortgage strategist and founder behind iQRATE Mortgages. With a mission to fund home loans that traditional banks won't touch, David specializes in helping clients with unique financial situations, including those recovering from foreclosure or bankruptcy. He expertly crafts smart, strategic, and stress-free mortgages by leveraging a vast network of over 100 lenders to secure competitive rates for investors and homebuyers alike. Praised for exceptional customer service, David has helped hundreds of families with a 97% satisfaction rate, guiding them to the mortgage they deserve.