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How is home equity divided in divorce?

When you split from your spouse, you undoubtedly have a lot to work through, from spousal support and custody issues to who is going to walk away with what. Asset division can prove complicated, and this may prove particularly true if your marriage was long-term and you have many shared assets.

If you and your soon-to-be-former spouse share a home, you may have questions about who the equity in that home will belong to, or how you might split it during your divorce. If this describes your situation, one of the first things you need to do is find out exactly how much your home is worth.

Determining your home’s value

Getting an accurate idea of your home’s current value requires getting an appraisal, and you may be wise to get two, with each spouse securing one. In most cases, there should not be much of a difference in the value that one appraiser reveals over the other, but having each party get an appraisal can help prevent further problems and disputes down the line.

Dividing equity

Once you have a solid idea of the value of your home, you typically have three options for how to divide equity. A first, obvious option involves simply selling your home and splitting the proceeds from the sale between you. This is often the easiest way for couples to divide equity if they no longer want to communicate with one another moving forward. A second option involves having one ex-spouse stay in the home by refinancing the existing mortgage and removing the other party’s name from it. This can free up enough cash for one party to buy out the other.

A third, less-common option involves both of you hanging on to the home. This type of arrangement tends to be more common when families have shared children still living in the home. However, it also may make sense if you are living in a market where you may lose a lot of money by selling your home.

While these are some of the more common methods divorcing spouses use to divide home equity, this is not necessarily an exhaustive list of all possible options.

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