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Specialty tag(s): Dividing the Marital Home, Property Division

Home Equity and Your Divorce: What You Need to Know

Clayton Bryant | March 21, 2023

A female real estate agent and a young woman talking at the front door of a home

One of the most important tasks divorcing couples face is dividing their property, particularly if the principal asset is the marital home. According to the most recent Survey of Consumer Finances, the primary residence is the largest asset among households across various age groups — apart from the 55-64 demographic who also tend to have equally important business interests. For this reason, the home’s equity is one of the biggest considerations when deciding whether to keep or sell the property.  

Home equity is the difference between the market value of the real estate and the amount still owed against it on a mortgage. Equity in a shared home is a unique asset; it involves shared value but is also characterized by joint debt. Deciding how to split home equity in your divorce can certainly be a challenge, but with a strong grasp of your options, you will have a better chance of coming to a resolution with your former spouse. 

Should We Keep Our Marital Home or Convert Equity into Cash?  

Many couples assume that the best way to deal with home equity in a divorce is to sell the house, pay off the balance of the mortgage, and split up any remaining proceeds. With today’s interest rates and real estate market, however, this is not always possible or desirable. 

If one spouse wishes to keep the house individually, a divorce agreement can be structured so that the party who gives up his or her interest in the home equity is compensated with other assets. For example, one party might give up a stake in a retirement account in return for sole ownership of the home. 

Normally, refinancing the loan under the name of just one spouse can be accomplished if the mortgage is not underwater and the spouse staying in the home has sufficient credit and income on his or her own to qualify for a refinance. If the spouse staying in the home is not able to qualify for a refinance, the mortgage may be left as it is, however, this is very risky; under such circumstances, the credit reports of both borrowers will be negatively impacted if mortgage payments are missed. 

There are workarounds if the mortgage is left in the name of both former partners. For example, your divorce settlement can state that if the one who keeps the house misses a mortgage payment, the house must be sold or refinanced. Whatever the arrangements, the party keeping the house should always preemptively prepare a comprehensive post-divorce budget to determine whether they can realistically meet not only the cost of the mortgage, but also home maintenance, utilities, and taxes. 

Explore Your Options with the Help of a Granbury Family Law Attorney 

If you, your former spouse, and your respective family law attorneys cannot come to an agreement about what to do with the equity in the marital home, a court will decide for you. However, it is almost always faster and less expensive for everyone involved if a settlement can be reached. 

While distributing home equity after divorce is never simple, it does provide opportunities for creativity and compromise. Whether you want to keep your house or just get your share of its equity transformed into a more liquid asset, an experienced family law attorney can help create solutions that work for you. Talk to a family law attorney today to learn more

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With over 15 years of experience, Clayton Bryant manages the full range of family law cases, including property division, child custody, and trusts and estates. A seasoned litigator, Clayton is experienced with jury trials and is a certified mediator. His clients include professionals and their spouses, parents who want to put the interests of their children first, and mid-life clients looking for the best path forward as they begin new chapters in life. 

For more information about home equity and divorce, contact Clayton Bryant in our Fort Worth or Granbury office at 877-219-8299. 

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