There are three main options to dealing with a jointly-owned house during divorce: sell the house and split the profits, co-own the house, or execute a home equity buyout. The latter is an option for when one spouse wants to keep the house and the other spouse is okay with releasing his control in exchange for a fair value of his share in the equity.
Determining if a Buyout is Right for You
The first step in a home equity buyout is to determine the value of your home. This will help you calculate the equity you have in the home. Say, for example, your home is worth $250,000 and you owe $200,000 on your mortgage. Your equity is $50,000. If you split this in half with your ex, then you each are entitled to $25,000 of the equity.
For the most accurate account of your home’s value, get a home appraisal. Bear in mind that this will cost a few hundred dollars for a professional appraisal report, but it is worth the expense so you both know the home’s value.
How to Buyout the Other Spouse
In a lot of home equity buyouts stemming from divorce, the spouse retaining the house will need to refinance the mortgage in her own name. If you need to refinance, you may need to take out a loan large enough to pay off the old mortgage and pay your ex-spouse his share of the equity.
Going back to the previous example, you still owe $200,000 on the home and you would need to buyout your spouse for $25,000, meaning you would have to get a loan for $225,000. Of that amount, $200,000 would go to pay off the original mortgage and the other $25,000 would go to your ex.
This would leave you with a home loan of $225,000 and you would be the sole owner of the home.
Alternatively, you might buyout your spouse in cash or you might give your ex other assets of equal value to his share of the equity.
Should I Try to Stay in the Home?
You have many considerations to make when going through a home buyout that extends beyond negotiating values and refinancing mortgages. There are fees associated with brokering the deal, transferring the deed, and more. However, there are many benefits to keeping the home for yourself, the most important being that it will give your children some stability as many other things change around them.
Keeping your home may be the best option for parents retaining primary custody of their children. It allows the children to keep going to their same school uninterrupted, stay near their friends and familiar places, and sleep in their same room.
Ultimately, though, you will have to weigh financial, emotional, and other factors to make the best decision for you and your children.
Get Divorce and Asset Division Help from Molly B. Kenny
Whether you're buying your share of your home or letting go of your rights to the property, do not do it without the help of an asset division attorney. My firm, The Law Offices of Molly B. Kenny, can help you protect your rights and get a fair deal during property valuation and division.
Contact me at 425-460-0550 for help with your marital property negotiations.