Dividing Equity in a Divorce

Equitable distribution of marital assets in a divorce does not mean equal distribution of assets. In calculating the equity of a home and other property, a court may find that one spouse is entitled to a greater share of the proceedings than the other. 

Equity and divorce

Equity is the difference between the actual value of a property and the amount that is still owed on the mortgage of the house. In a divorce, you and your ex have to divide your marital assets (possessions). This includes any equity either of you has in your home. 

You will have to calculate the amount of equity that is left in the home and figure out how it should be divided between you and your ex.

Dividing equity in a divorce

In many cases, the most valuable asset in a divorce is the family home. It is common for divorcing spouses to disagree on how to divide the value of a home they both lived in (and have been making payments on) for years. Difficult as it may be, calculating the equity of a home is a big part of coming to a divorce settlement. 

As a marriage progresses, spouses (both as a couple and individually), acquire items of value (“property”). This can include the family home, but it also covers a wide range of other items, such as cars, furniture, jewelry, bank accounts, stocks, and retirement accounts. 


Preparing for divorce

To calculate how to divide equity in your divorce, you should start by collecting every important financial document you can find. Start by looking at whatever you and your spouse share ownership of (joint assets). This can cover cars, bank accounts, credit cards, medical bills, and your home. 

Find documentation about your joint debts, including your mortgages and loans on your cars, retirement plans, and school payments. Be as comprehensive as you can be in collecting all this paperwork. Don’t risk leaving anything out. 

For most people, the family home is the most valuable asset they have accumulated during the years of their marriage, which means the value of the home is going to have a considerable impact on the post-divorce finances.

Calculating the value of the home can come down to location, the state of the housing market, the length of time the house has been owned, and a number of other factors. This makes the division of home equity one of the most financially significant parts of divorce (if not the most financially significant part of the divorce), ultimately amounting to hundreds of thousands of dollars. 

What are the options for determining the value of the house in a divorce?

There are a number of ways to determine the value of your house for your divorce. You could get a formal appraisal, a comparative market analysis, or a property tax assessment. You could also use Zillow, Redfin, or another online price estimator. 

Determining equity in a divorce

To determine equity in your divorce, you’ll need to assess individual circumstances related to your house or other property. It is possible, for example, for one spouse to buy out the other spouse’s interest in the house, usually involving refinancing the home in one spouse’s name so the other spouse is completely removed from all home-related obligations. 

If you keep the house, you may take out a loan that is large enough to pay off the existing loan. With this, you can pay your spouse the amount of equity they would be owed. For instance, your house may have an existing mortgage of $100,000 and the same amount of equity. That means the loan you would take out would have to be $150,000, of which $50,0000 would go to the selling spouse to pay off the existing mortgage.

On other occasions, one spouse may trade their ownership interest in the house for some other marital asset or property, or some other interest, like not having to provide spousal support (or financial maintenance) to the other spouse. Regardless, a refinance is typically required, so the other spouse is not liable for any existing debt that is still on the property. 

A third option is that the house could be sold before the divorce is final. For this to happen, the house must be put on the market, and the deal must close before a judge signs the final decree of divorce. 

Disagreeing about equity

If you want to sever your relationship with your ex before you have to go through the process of selling the house, the divorce settlement may explicitly state that the spouses are required to divide the proceeds of the house sale equally or in some other manner that both spouses can agree on or as ordered by the court. 

It might also be the case that you and your ex do not want to sell the house and want to remain co-owners of the property. This means that you and your ex would remain financially connected, which could cause problems later on. However, this arrangement does offer each spouse the benefit of continued profits as the property appreciates in value. 

For any desired scenario to play out, the spouses must have an accurate and concrete figure of the amount of equity in the home. This is the amount that will eventually be provided to the spouses or divided between them. The equity of the home is the home’s market value, minus existing debt and any costs to divest the home. 

Suggested: Home Equity Buyout Calculator

Spouses can come to a mutual agreement on the value of the house, but it is also possible that you and your ex might have your own reasons to value the house differently. Even if you don’t see eye to eye on this, it is important not to create an imbalance in the marital estate by settling on an equity value that is too far from a reasonably realistic figure. 

If this kind of disagreement exists between you and your ex, a real estate appraiser can offer an independent appraisal of the value of the house. You could also get a real estate agent to give you a market analysis to best estimate the property’s value. 

As a last resort, the divorce court itself could rule on the value of the property. However, this is the most expensive option. 

Differences in equity

When the amount of the equity is calculated, you and your ex can figure out how to divide the equity. For example, if both of you were employed during the marriage and contributed equally to the mortgage you acquired after you were married, the equity would typically be split 50/50.

That may not always be the case, however. 

Sometimes, one spouse puts separate assets toward the purchase of the family home. Other times, a spouse makes an unequal contribution toward the mortgage. It is sometimes the case that one spouse already owned the home at the time of the marriage, but the other spouse contributed to the maintenance of the mortgage by making payments, or they made other investments that had an effect on the value of the property. 

When cases like these occur, the other spouse may be entitled to some share of these contributions. When this happens, attorneys representing the respective spouses may try to reach a settlement that accounts for all these factors. 

What factors could influence the split in equity?

When dividing equity in a divorce, it is important to remember that equitable distribution does not necessarily mean equal. A court can distribute the property in favor of one spouse and not the other. Here are some factors that might influence that split:

  • One spouse advanced their career, and the other didn’t. This could include going to school for the purpose of getting a degree that would help with employment, like law school or medical school. The court will order a higher division of property for the other spouse because, even though they did not advance their own career, their maintenance of the home and family assisted the other spouse’s advancement.
  • One spouse empties a joint bank account at some point during the divorce. This is considered financial misconduct. The court will order a higher division of the property for the other spouse to pay them for the lost money.
  • One spouse has a chronic medical condition that affects their work and living, while the other spouse is able to work and earn money accordingly. The court will usually give a higher degree of property to the non-working spouse, taking into account their age and health as well as the fact that the divorce will significantly affect their financial status and ability to afford healthcare.
  • One spouse remains in the family home to continue caring for any children present. Courts usually try to maintain the best interests of the children. To compensate the custodial parent for child-rearing expenses, the court awards this parent a higher share of the property.
  • If one of the children is disabled, the court will award a more equitable amount to the custodial parent to help them care for the disabled child. This is because the custodial parent cannot be expected to work full-time while being their child’s caregiver.
  • Only one spouse continues to make mortgage payments on the house while divorce proceedings are ongoing. The court awards a higher share of the property to the spouse who paid the mortgage while the other did not. 

What financial options do you have for your equity when going through a divorce? 

When going through a divorce, the most common financial options to divide your home equity are as follows:

  • Buying out your spouse with a home equity loan
  • Refinancing the mortgage
  • Selling the house

If you and your ex agree that selling the home is the best option, you can divide the proceeds and part ways. If one spouse wants to keep the house (or only one spouse is qualified to keep the house), both of you will need to find another option to receive your appropriate share of the equity. 

FAQ about dividing equity in a divorce 

Will I get half the equity, or half the value of the home, when I divorce my ex?

Not necessarily. Distribution of assets during a divorce does not necessarily mean that things are split evenly. Various factors come into play in determining what percentage of equity you get.

Can I get my equity share before the house is sold?

You and your ex would have to agree to this, or you would have to convince the court to order this. 

Does equity get split evenly when the home is sold? 

If both you and your spouse contributed equal amounts to the house, including the down payment and mortgage payments, the proceeds may be split 50/50. If one spouse contributed more or various other factors come into play, however, the proceeds may be divided in a different manner. 

What if my ex refuses to split the equity in the house?

If your ex fights you on the equity, legal assistance can help you learn your options. You are entitled to a portion of the proceeds of the sale of the home, and if you’ve paid the mortgage, that will make a difference in what the court awards you. 

How can my spouse and I divide the equity fairly?

A mediator can help you through the process of ironing out the details of your divorce, such as dividing equity. Using a mediator is much less expensive than hiring a divorce attorney and battling it out in court.


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