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3 solutions when addressing home equity during divorce

On Behalf of | Oct 23, 2024 | Property Division |

For many married couples, the home where they live together may be their most valuable asset. They may have saved for several years to afford a down payment and may have made numerous improvements to the property since taking possession of it.

The equity they have accumulated in the property may be the single biggest contributing element to their personal wealth. For many people, finding fair solutions for home equity is a top priority during divorce proceedings. There are a variety of different potential solutions that can allow people to fairly share the equity they have acquired in their homes when they divorce. The following are among the most common.

Refinancing to withdraw equity

The simplest and most direct solution for splitting home equity is often to have the spouse retaining the home refinance the mortgage. Refinancing is often necessary to remove the other spouse from the mortgage and the title to the home. They can withdraw equity as part of that transaction to compensate their spouse for their share of the home’s value. Such scenarios require that the spouse refinancing has adequate income and a good enough credit score to qualify for a mortgage on their own.

Selling the home

Sometimes, neither spouse is able to qualify for a mortgage on their own because of their income or credit score. Other times, couples may have too many memories at the home or may have only recently acquired the property, meaning that they have limited equity. In such cases, selling the home may be the best solution available. The spouses can list the property for sale and then divide the funds received after paying the mortgage and other costs.

Offsetting equity with other assets

In scenarios where withdrawing equity might make mortgage payments prohibitively high, The spouses might agree to an alternate arrangement. It is possible for the spouse giving up possession of the marital home to retain other valuable assets to offset their share of equity. Such arrangements can help keep the mortgage affordable for the spouse staying in the home. Businesses, investment accounts and retirement resources are among the valuable assets that can help balance out home equity.

Finding custom solutions for complex property division matters can help people handle the biggest challenges of a divorce. Seeking legal guidance is a good way to get started.

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