Divorce Buyout Refinance: Key Insights for a Smooth Process When a marital home is awarded to one spouse during a divorce, a buyout refinance is often necessary. This is especially true when the spouse keeping the home cannot assume the existing loan due to the need to pay out the other spouse’s equity. In these cases, understanding the nuances of Fannie Mae and Freddie Mac guidelines is crucial. 1. Rate-and-Term Pricing vs. Cash-Out Refinancing One of the most significant benefits of a divorce buyout refinance is that it can often be treated as a rate-and-term refinance rather than a cash-out refinance. This distinction is vital because: Rate-and-term refinances typically have lower interest rates and fewer fees compared to cash-out refinances. This can save the borrower thousands of dollars over the life of the loan. To achieve this, the final divorce decree must explicitly document the buyout as part of the marital property division. Without clear language, ...