3 ways to divide home equity during divorce

| Aug 27, 2020 | Divorce

Once you place emotions aside, divorcing your spouse primarily involves making custody and similar decisions and dividing up assets and debts. If your situation is similar to many others, your home may be your most valuable shared asset, so it is worth giving careful consideration to how to split up any equity you have in it.

According to NerdWallet, there are three basic ways to divide home equity. While other options may exist, these are the most common ways divorcing couples divide the value of the equity they once shared.

1. Sell the house and split the profits

The simplest way to split your home equity may be to list the home for sale and then split any profits you make on it in half. This gives you and your ex an opportunity to make a clean break from one another. It may also help free up enough money for you to move somewhere else.

2. Have one of you refinance the mortgage

If you want to keep the home and your ex does not, or vice-versa, that one who wishes to stay may want to refinance the mortgage and get in in one name. The party wanting to stay then secures a new loan and buys out the other party’s share of the equity.

3. Consider “bird-nesting”

Depending on finances and other variables, you may decide to try “bird-nesting” when your marriage ends. This involves having each of you take turns living in your once-shared home. This option may make sense if you are waiting for teenage children to move out, or if the real estate market in your area is such that you would lose money if you chose to sell the home.