What happens to home equity when you divorce?

On Behalf of | Apr 6, 2020 | Divorce

When you and your significant other decide to part ways, you are going to have to determine which one of you is going to retain ownership over the assets you share. Ultimately, the steps you take to divide your property are going to vary based on just how many shared assets you have. However, most married couples who purchased homes together during their marriages are going to need to figure out how to divide any equity they have accrued within those homes.

Just how may you go about dividing up home equity? Most former couples choose to split up home equity using one of three methods.

Method 1: Sell the house, split the profits

If one of your main objectives is to have a good, clean break from your former partner, you may want to simply list the house for sale and split the profits. That way, you each have a nest egg to use for a down payment or security deposit on a place of your own after your divorce.

Method 2: Refinance the mortgage

If you or your ex wants to stay in the home you once shared after you part ways, one of you may want to refinance your existing mortgage so it is under only one name. That way, the party wanting to keep the home has the ability and, presumably, the means, to buy out the other.

Method 3: Remain in the home together temporarily

If you are facing a bad real estate market and expect to lose a good deal on the sale of your home, it may serve both of you well to hold off until the market improves. If finances allow and you share children who live in the home, you and your ex may want to take turns living in the house until you may reasonably make a profit by selling it.

While you may find that you have additional options available to you when it comes to dividing the equity in your home during a divorce, most people choose to do so using one of these three methods.