Brazil & Benske, LLC

What happens to home equity when you divorce?

Divorcing your husband or wife is generally a highly emotional process, and there are a number of important matters you will need to address along the way. Chances are, your shared home is one of, if not the, most valuable asset you and your spouse co-own. Therefore, one such matter you will need to devote attention to is what you plan to do with the house following your split.

When it comes to dividing home equity during divorce, you typically have three options at your disposal.

Option 1: Divide sale proceeds down the middle

In many cases, couples who decide to go their separate ways want a fresh start, and this might mean both parties plan to vacate their once-shared home. Therefore, one method of dividing home equity amid divorce simply involves selling the house and splitting the proceeds from the sale between the two of you.

Option 2: Have one party stay while the other party leaves

If you and your spouse have, for example, children living in your family home, you may decide to have one spouse remain there in an effort to avoid uprooting them kids from what is familiar. If you opt for this route, your best bet might be to have the person who stays in the house refinance the mortgage to exclude the other party. That way, your children still get to live in the home, but you and your soon-to-be-ex-spouse no longer share the asset.

Option 3: Maintain joint-ownership of the home

A third and typically less common option involves having both parties remain in the house for some time following the split. While this may not work for many couples, it may be the only option for those who do not have enough saved up to live separately. This option may also work for high-income couples who have the resources available to split their time between the family home and another one.

Typically, most divorcing couples choose one of these three options to divide home equity during divorce. That does not, however, mean that these are your only options, and some divorcing couples get creative in the ways they choose to split home equity between them.

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