Divorcing couples generally need to split up their property. As the value of their shared assets increases, so does the likelihood of conflict related to those resources. For many married couples, the home where they live is their most valuable shared asset. Typically, only one spouse can continue living at the home after they divorce. However, both spouses may want to ensure that they receive their fair share of home equity.
How can spouses share the wealth accumulated in their marital residence?
By refinancing
In scenarios where one spouse intends to stay in the home and the other plans to leave, refinancing the mortgage is usually necessary. The spouse staying in the home can withdraw equity that they use to compensate the other spouse for their interest in the property.
Of course, doing so may increase the principal balance due on the mortgage and therefore the monthly payments. Not everyone can qualify for a mortgage without the income and credit score of a spouse.
By using other assets
In scenarios where the spouse hoping to keep the home cannot afford it if they liquidate equity, creative solutions may be necessary. Other high-value assets, such as retirement accounts or vehicles, can help balance the value of home equity.
Making the spouse who stays in the marital home responsible for more marital debts can also potentially be part of the solution for addressing home equity. In cases where refinancing proves impossible or neither spouse wants to remain in the home, selling the house could be a reasonable solution.
Identifying assets that could cause disputes during divorce can make it easier for people to strategize. Spouses who focus on the big picture when settling property division matters may ultimately feel happier about the outcome than those who let their emotions govern their behavior during divorce.