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What happens to home equity when you divorce?

On Behalf of | Apr 16, 2020 | Divorce

When you and your ex come to the difficult decision to part ways, you are undoubtedly going to need to work through asset division and otherwise take necessary steps to disentangle your lives from one another’s. The extent of the process is going to vary based on the length of your marriage, how many assets you share and so on, but if the two of you own real estate together, you need to figure out what to do with it.

NerdWallet reports that most former couples navigating divorces choose to split the equity they have in their shared homes in one of three ways.

Option 1: Sell the home and divide the profits.

If neither of you wishes to stay in the home you purchased together, it may be easiest to simply sell the house and then divide up any profits you make on it equally. This gives you a chance to make a solid break from one another. It may also give you a nest egg to use to purchase or rent a place of your own.

Option 2: Refinance the mortgage and exclude one party.

If you or your ex wants to stay in the home, this typically involves having that person refinance the mortgage to get it in his or her name, exclusively.

Option 3: Remain in the home together temporarily.

If you have kids who may soon move out or if you believe selling your home would result in a major financial loss, you may want to hold off for the time being. You could, if budget allows, take turns living in the home, or you may stay there together temporarily if your relationship is amicable enough.

While other options may exist as far as splitting up your home equity, the majority of people working through divorces do so using one of these three methods.

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