How is Home Equity Split During Divorce?
By Danny Johnson
Considering selling your house because of divorce? Here is how the equity will be split.
- Determining What the House is Worth
- Basics for Calculating Home Equity
- Ways to
- Negotiating Your Share of the Equity
- Selling the Property
🗂 Table of Contents
There are many financial arenas that can complicate the divorce process and many things that have to be divided out as fairly as possible between the two parties. Perhaps the most difficult area to settle is what is to be done with the family’s San Antonio home.
If you're thinking, "what can I do with a San Antonio house during a divorce?", you've come to the right place.
Divorcing couples have several options when it comes to deciding how to split house equity fairly.
Because each situation is unique, it’s important for couples to explore several options and choose the one that is best suited to their particular circumstance.
At the end of the article, we'll tell you how you can sell a house fast in San Antonio to a real estate investor. This way you can quickly move through the divorce and get your life back.
Determining What the House is Worth
In order to determine the equity, you have built up in the house, you will first need to know how much the house is worth.
There are a couple of ways to find out the worth of your house. The easiest way is to find the most recent tax bill for your property. For Bexar County, this would be bcad.org.
It will contain an assessment rate which is usually between 80 and 90%. Property taxes are calculated on a percentage of the fair market value of the property. If you have the tax assessed value of the property ant its assessment rate, you can find its fair market value.
Another way to find the value of the house is to use an online value estimator. You may also have the property appraised by a qualified real estate appraiser. Make sure the appraiser considers any enhancements or additions on the property, especially if they increased the value of the home.
Basics for Calculating Home Equity
Before you can make any determination about how to split home equity, you will need to know how much equity you have invested in your home.
Your equity is the difference between the value of the home and the mortgage or other liens that might be on it. To find out how much you owe on the house, contact your lender and ask for the “pay off” amount.
Remember to include second mortgages, equity credit lines or any other debts or liens that might be against the home too. To calculate the equity of the house take the total of all the liens on the house and subtract it from the appraised value of the house. This will give you how much equity you have in the house.
One thing to consider is how to get one person off of the loan after the divorce. You can refinance the house after divorce but there might be problems qualifying for the loan as a single person.
Ways to Split House Equity
Once you know how much equity the marital partners have in the house, you can choose a way to split house equity between the two.
Your house is considered community property if it was acquired during the marriage. As community property, each of the spouses have half interest in the house and therefore, should each be due half of the equity and it should be divided equally. However, in some cases, one party wants to keep the property. There is also a way to fairly divide the equity in these cases.
It’s not too difficult to divide the equity in a divorce if one partner wants the home. If one of the marriage partners wants to keep the house, there is a way to divide the equity.
In these situations, the two must decide on the value of the house and then the person who is keeping the property will buy the home from the other. Basically, they will pay the exiting party for their part of the equity in the home, and not the full value of the house.
Another option is to refinance the property with the new mortgage being in the name of the spouse who is making the purchase. As part of the new loan, you’ll take out enough cash based on the equity of the house to be able to pay the other partner their share of the equity. The home will need to be put into the name of the sole owner once this transaction has been completed.
Negotiating Your Share of the Equity
There are several different factors that have to be considered when determining how much your share of the equity is in the home. You will have to look at the laws in your state, any judgements, and how you are going to negotiate for your half. Even though the factors can vary here are a few you may need to consider:
- Was the property a premarital asset? In other words, was the home purchased by you or by your former spouse before the marriage occurred using separate, non-marital funds?
- Is the home, or its equity, covered by some type of prenuptial agreement? This can affect the outcome.
- Did you make any contributions to the property during your marriage? Did you make payments on the mortgage using separate funds? Did you pay property taxes or make improvements on the property?
- Is your state an equitable distribution principle or a community property state?
These are all factors that can influence how the equity can be divided between the two parties.
Selling the Property
If both parties agree, sometimes the home is sold for cash. It’s important to make sure you know the worth of the property and that you get top dollar for it.
Once the home has been sold and any mortgages and debts against the property taken care of, the remaining portion is the equity you had built up.
This can be equally divided between the two of you as long as you agree on all points. In some cases, there may be a need for legal guidance to ensure it is all done in an equitable and fair manner.
To simplify the process, you have two basic options for dividing the equity of your home during a divorce.
These include buying the other party’s half of the equity and selling the home fast to an investor and splitting the profit equally. In order to do this, you will need to know the value of the home as well as how much equity you have built up. From these two values the two parties can choose how to divide equity fairly and appropriately.