Home equity slowly accrues over time and is often one of the biggest contributing elements to the marital estate shared by spouses. They may need to divide that equity when they divorce.
There are several ways for the spouses to fairly address their accrued equity during property division proceedings. The right solution depends on the unique circumstances of the spouses.
Refinancing the mortgage
Frequently, both spouses are on the note for the mortgage. Therefore, the spouse staying in the home after the divorce likely needs to refinance to remove the other spouse from the mortgage. During the refinancing process, they can withdraw equity to compensate the other spouse for their interest in the property.
Leveraging other assets or debts
The person staying in the home may not be able to afford the mortgage if they withdraw a substantial amount of equity. They may seek to balance the value of the home with other assets.
Allowing the spouse leaving the home to retain a business, investment accounts, retirement savings or other valuable resources could make the final property division arrangement more reasonable. The spouse staying in the marital home can also accept responsibility for more marital debts.
Selling the home
Sometimes, neither spouse can afford to stay or wants to live in the marital home after divorce. In such cases, listing the home for sale and then splitting the proceeds in a specific manner may be the most appropriate solution.
Spouses can choose the approach that works best for them. If they litigate property division matters, then a judge may make that decision for them.
Learning more about what happens during divorce and property division proceedings can help people protect themselves. People who push for fair outcomes may want to use their share of the marital estate to rebuild after divorce.