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3 solutions for sharing home equity during a divorce

On Behalf of | Jan 21, 2025 | Divorce

Divorcing couples need to have many difficult conversations. They have to work out solutions for separating lives that they previously combined. Some couples have to address child custody and financial support matters.

Almost all couples have to divide property and financial obligations. That process can become much more difficult when the spouses share a home. They have to divide their home equity in a fair manner. Even when one spouse readily acknowledges that they cannot afford or maintain the marital home on their own, they still have a right to a fair share of the accumulated equity in the property.

How can couples address accumulated home equity when they divorce?

1. By refinancing

The simplest solution for home equity is often to have one spouse refinance. They can then withdraw a portion of the equity to compensate the other.

Doing so increases the principal balance of the mortgage and therefore the monthly payments due from the spouse staying in the home. It is not always the best solution available, but withdrawing equity can work in many cases.

2. By using other property or debts

Couples don’t have to actually divide specific assets to achieve a fair property division outcome. They can use other line items from the marital estate to balance out home equity. It is possible for one spouse to retain the home and all of its accumulated equity while still finding a fair solution that gives each spouse an equitable share of the overall marital estate.

Investments, vehicles and businesses can help offset the value of accumulated home equity. The spouse retaining the marital home might also agree to take on more of the marital debt to ensure a fair long-term financial outcome.

3. By selling the home

In some cases, neither spouse can truly afford the property without a second stream of income. Even if they can, the memories attached to the property may undermine their ability to enjoy living there after the divorce.

For some spouses, the best way to share home equity is to sell the marital home. They can then divide the proceeds of that sale in a reasonable manner.

Considering viable solutions for higher-value assets may help people feel more satisfied with the outcome of property division proceedings. Divorces often require flexibility and creativity, especially when negotiating asset division matters.