Navigating a divorce can be complex and emotional, particularly when it comes to dividing shared property. I’m here to shed some light on a process known as an Equity Buyout in divorce, a path many divorcing couples explore in their real estate journey.
What an Equity Buy Out is and how it works
An Equity Buyout takes place when one spouse wishes to retain the marital home after a divorce and compensates the other spouse for their share of the home’s equity. Equity, for those unfamiliar, represents the market value of your home minus the following items: the remaining mortgage payoff balance, outstanding liens or judgements, deferments or forbearance costs, any HELOC loan balances, solar panel purchase contracts, etc.
How Equity is determined
Market value can be determined by a Comparative Market Analysis created by a realtor familiar with the subject market, or an appraisal report created by an appraiser. It’s extremely important to ensure both are current and in real time. Once equity is determined, the spouse retaining the property can “buy out” the other spouse’s share. This can be done through cash payment, owelty lien, refinancing the mortgage to release equity, and/or offsetting the value against other marital assets. Factors such as outstanding mortgages, market trends, and tax implications are all crucial considerations during this process.
Benefits of an Equity Buyout
While an Equity Buyout can have benefits – fewer disturbances to daily life, continuity for children, potential financial gains from the property’s future appreciation, it’s as important to be aware of associated future mortgage payments, housing costs, and property maintenance requirements.
How I can help
Do you have questions about Equity Buyouts or simply need someone to discuss your options? I’m here to help, and I have a network of divorce lending professionals to refer to you as well.