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Question: How do I enter a buyout of the marital home?
Answer: The software makes it easy to enter a buyout of the marital home.
Use the following steps:
1. Enter the real estate property. If you have not already done so, go to the Client Info >Assets & Debts screen, and click on the button to add a Real Estate asset for the home.
2. Enter real estate information. Enter the real estate information that you know at the top level, and then click the link for more info.
3. Enter a refinancing mortgage. Typically the way a buyout happens is that the parties take out a refinancing mortgage and use some of the proceeds to buy out the other spouse. To enter a refinancing mortgage in the software, scroll down to the section entitled First Mortgage, and answer "Yes" to the question about whether this will be a new or refinancing mortgage, as shown below.
4. Enter the refinancing questions. When you are finished, pay special attention to the amounts retained by each party as shown below. The software calculates the total proceeds available by subtracting the old mortgage balance from the new mortgage. You then specify how much of those proceeds one party is keeping, and the software calculates how much the other party is keeping.
In the example above, the available proceeds are $250,000. This is calculated by subtracting the old mortgage amount (line 10) of $150,000 from the new mortgage amount (line 4) of $400,000.
In the example above, we specified that Bob is keeping $100,000 (line 11).
The software was then able to calculate that Mary will keep $150,000 ($250,000 - $100,000) (line 12).
Please note that this refinancing transaction will not be reflected on your state's financial affidavit, as it is anticipated to occur in the future. The financial affidavit shows assets as they are today.
The refinance proceeds will flow into cash flow of the recipient party or parties in the year of the refinancing.
The refinance proceeds will also appear as an asset on the Property Division screen (Negotiate tab > Property Division) and the Marital Property Division report.
4. Specify ownership. When you specify ownership of the property, specify who will own the property after the refinance. Typically that is only one party, the party that is not being bought out. You can specify ownership on this same page, a bit further down. You may also specify ownership on the Property Division report.
The Marital Property Division report will show the equity after the refinancing.