One of the most commonly asked questions during divorce proceedings is: who gets the house?
If you want to keep the home, you can offer to buy out the other spouse. Since you and your spouse co-own the property, you may have options other than providing cash.
Today, let’s break down the details of a divorce house buyout and explore ways to keep your home.
In most no-fault divorces, the shared marital property between two ex-spouses is divided equally. However, that’s impossible with something like a house; after all, you can’t legally split the home into two.
That’s why, in many cases, one of the spouses may try to purchase the marital home from the other – if it hasn't already been determined that they will sell the property and split the proceeds.
The challenging thing is a divorce house buyout involves negotiating a home purchase with someone during emotionally fraught times. Because of this, divorce house buyout negotiations can often be tense and difficult.
If you love the house you shared with your ex-spouse and want to purchase it from them, rest assured that there are ways to buy it out after a divorce.
As you begin working toward a divorce house buyout, consider all the fees you’ll have to pay in addition to purchasing your ex-spouse’s equity. For example, paying for an appraisal and inspection before buying the home can be a good idea, especially if you weren’t present when your spouse originally bought the home.
An appraisal will ensure you pay fair market value for the home, not whatever your ex-spouse claims their equity is worth. That can be a significant advantage if your ex-spouse tries to sway negotiations and walk away with more money than they should.
Let's take a look at three distinct strategies you can pursue:
One way to keep your home after a divorce is to purchase your ex-spouse’s equity. This is possible if you and your ex-spouse owned the home, meaning you built joint equity. Usually, two people who purchase a house split the equity equally.
So, when you buy out your ex-spouse's equity, you pay your ex-spouse for their portion of the home. Of course, just how much equity your ex-spouse has will depend on your state and whether you owned the house before marriage. A knowledgeable divorce attorney can provide you with further assistance on the matter.
You can also refinance your mortgage to purchase your ex-spouse's portion of the home. This is an especially beneficial strategy if you need more money to buy out your ex-spouse’s equity.
When you refinance your mortgage, you can cash out any equity you’ve built up, then use it to purchase your ex-spouse’s homeownership portion. By refinancing, you’ll also remove your ex-spouse’s name from the mortgage entirely.
This could be helpful in the future, as it means your ex-spouse won’t be legally responsible for making payments and will no longer have a claim to ownership of the property under any circumstances.
Remember that you’ll have to show your mortgage lender that you have a high enough income to qualify for the mortgage by yourself.
Balance Homes is a co-ownership solution with a mission to help American homeowners stay connected to the homes they love by offering a flexible alternative to traditional financing when life circumstances change. Our model also focuses on long-term financial health and education, helping homeowners understand their options, manage their equity, and build a plan that fits their needs.
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Sources:
How to Negotiate a House Buyout at Divorce | DivorceNet | Divorce Net
Home Equity: What It Is, How It Works, and How You Can Use It | Investopedia
Refinance: What It Is, How It Works, Types, and Example | Investopedia
Home appraisal: Everything you should know | Chase.com
Separate and Marital Property: What Gets Divided in Divorce | Nolo
