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What happens to home equity when you divorce?

When you and your spouse make the difficult decision to divorce, you will undoubtedly need to figure out how to divide up your shared assets. Often, the most valuable asset a married couple shares is a home. Thus, figuring out what you and your ex are going to do with any equity amassed in your home throughout the marriage is an important step in the process of asset division. You can use several different tactics to divide any home equity you may have.

While there may be alternative methods for dividing home equity in addition to those outlined below, most people facing similar circumstances choose to split their home equity using one of three popular methods.

Method 1: Sell the home and split your earnings.

It is highly likely that after your divorce, neither you nor your ex wants to stay in the home you shared while married. Thus, selling that home and taking any profits you make from the sale and splitting it between you can be a good way for each of you to get a little money in the bank you can use for a fresh start.

Method 2: Have one party refinance the mortgage.

While it is common for both parties in a failing marriage to want to flee a once-shared home, in some cases, one party or the other wants to retain it. Doing so generally involves having the person who does want to remain in the marital home refinance the mortgage so that it only lists his or her name, effectively excluding the other party.

Method 3: Both parties remain in the home temporarily.

If you feel fairly certain that you would have to sell your home at a big loss, you may not want to list it immediately. Depending on the type of relationship you have with your ex after your split, you may want to remain there together temporarily while you wait until you can make a better profit on the sale.

Regardless of what method you use to divide home equity, an important step in the process involves determining your home’s exact worth. It may benefit you to have you and your ex each secure your own appraisal, as doing so can increase the chances of getting an accurate depiction of your home’s true value.

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