What happens to home equity when you divorce?
When you and your ex decided to purchase a home together, you probably did so under the assumption that you two would stay together in that home for the foreseeable future. In many instances, though, marriages come to an end. If yours is among them, you need to figure out what to do with your shared asset.
If the value of your home has increased since you purchased it, you will have at least some amount of equity in it. You have several options available to you when it comes to how to divide it.
Option 1: Sell the home, split what you make on it
If you and your ex want to make a good, clean break from each other, you may want to simply sell your home and divide any profits you make on the sale. This gives you a chance to separate your lives from one another’s while also potentially securing enough money to put down a deposit or down payment on a new place to live.
Option 2: Keep the house for the time being
If, say, you and your ex have children together who are college-bound, you may want to remain in the home together, at least for a brief period. You may decide to do so while staying in separate bedrooms, or you may decide to have you and your ex stay in the home on alternate weeks.
Option 3: Buy out your ex by refinancing the mortgage, or vice versa
Maybe you want to continue to live in your one-time marital home, or perhaps your ex does. Regardless, you can typically accomplish this by having the person who wants to stay there refinance the mortgage to eliminate the other’s name.
While you may be able to come up with other methods of splitting equity you have built up in your home over time, most people navigating divorces choose to use one of these three tactics.