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What happens to home equity when you divorce?

On Behalf of | Jun 12, 2019 | Firm News |

When you split from your spouse in Connecticut, you will need to sort your way through a number of important matters, from how you will divide valuable assets to how you plan to share custody of your child or children, if applicable. When it comes to dividing your assets, your most valuable shared asset may well be your home, and you will generally have three different options when it comes to dividing up its equity.

Before you can decide which option best suits your needs, though, you will need to determine exactly how much equity you have in the home in the first place. To do so, you will need to determine its value and then subtract the amount you still owe on your mortgage from its current value. Once you both agree on the amount of equity you have of your home, you can move forward with one of three options.

Option 1: Sell and split the proceeds

Often, people who split from their spouses want as few reminders of their former lives as possible. For this reason, many divorcing parties opt to sell the once-shared home and split the proceeds so they can each start life anew.

Option 2: Have one ex-spouse buy out the other

In the event that one former spouse does not see the once-shared home as something he or she would like to leave behind, that party can consider trying to refinance the mortgage to exclude the former husband or wife. That way, the person who wants to stay can stay, and the person who wants to vacate can have a nice nest egg to utilize in finding a new place to live.

Option 3: Remain in the home for a period

In some instances, the housing market may not be in the right position to give you a favorable return on your home sale. Under such circumstances, you may choose to both stay in the house until conditions improve, or you may choose to take turns residing there.