Your spouse wants to keep the family home and offers to pay you for your share. You might prefer this to selling the house, especially if you are ready to move. Still, you want to know whether the offer is fair and whether you will have any costs after you leave.
Before you agree, it helps to look beyond the amount your spouse offers. These three questions cover what the home is worth, whether you will still owe on the mortgage and how taxes could affect what you receive.
1. Is the home worth what your spouse says?
The price you paid years ago does not tell you what buyers would pay today. A recent appraisal estimates the home’s value based on its condition and sales of similar homes nearby.
If you disagree with your spouse’s estimate, another appraisal could help. Even after you agree on a price, you do not automatically get half. Missouri courts divide marital property fairly, but not always equally.
2. Will you still owe on the mortgage?
Suppose your home is worth $600,000 and you owe $250,000 on the mortgage. That leaves $350,000 in equity, the value left after you subtract the debt. A buyout usually starts with your share of that equity, not the home’s full price.
Getting paid for your share does not remove your name from the loan. If you remain a borrower, the lender can still hold you responsible even if your spouse promises to pay. Once your spouse completes a refinance in their name alone, the new loan pays off the old one.
3. Will taxes change what you receive?
Federal law generally allows you to transfer your share of the home to your spouse as part of a divorce without paying income tax on the gain at that time. But the type of payment matters.
Your spouse might offer stocks instead of some cash. If you later sell those shares at a gain, you may owe tax, which could reduce what you keep.
Review the written terms
A buyout is one part of settling your shared finances during divorce. You may want to check the payment date and how your spouse plans to pay off the joint mortgage. The written agreement could also say what happens if your spouse cannot refinance.
