One of the biggest decisions to be made during the divorce process is what will happen to the family home?  This decision is more than just a legal one.  It impacts both emotions and finances.

Although there are many factors to consider, generally there are two options for the home – either one spouse will keep it or it will be sold.  Regardless, determining the amount of equity in the family home is an important first step in being able to make this big decision.

Simply stated, equity is the difference between the value of the home and the amount owed in mortgage/debt against the property. 

For example, let’s consider a couple who has a mortgage on their home. In this example, the home is valued at $300,000 and the mortgage is $200,000

 This is what the equity calculation looks like:  

Home Value  $ 300,000 

Mortgages  – $ 200,000 

___________________________

Equity             $ 100,000

With a home valued at $300,000, and a mortgage totaling $200,000, the difference (the equity) is $100,000.  

How home equity is divided depends on the plan for the home in the divorce. If the house is to be sold, the equity will most likely be divided at the time of sale, after the costs of the sale have been paid. However, if you or your spouse will be awarded the home, the other party will be compensated for their share of equity. 

The compensation may be in the form of other assets or an agreement to refinance and reimburse the other spouse for their share of equity.

You and your spouse’s home may be one of the most valuable assets in the divorce. Thus, it is important to communicate with your attorney regarding:  

  • Valuation of the property. 
  • Refinancing to remove mortgage liability of one party.  
  • Dates that actions, like listing the home, should be taken. 
  • Who the real estate agent should be. 
  • How costs for preparing the home for sale should be allocated.  
  • How making mortgage payments should be handled.  

 If you are considering divorce, talk to an experienced Koenig|Dunne attorney regarding the impact your home equity may have in the overall division of your marital estate.

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