Divorce and Sharing Your Home's Equity

The Sandon Group
Financing Your Dreams Into Reality




Frequently asked question: My spouse is entitled to share in the equity we have in our home...how is this handled?



This is a must ask and get answered question before you proceed with your divorce. Your attorney may be excellent in his/her area of expertise, but they do not know the ins and outs, the costs or the market conditions as well as your mortgage professionals.



First, the equity in the home needs to be determined, most often by an appraiser. It is important that the appraiser is licensed and is ethical. You should use an independent appraiser, unrelated to the parties involved, to avoid any bias. Mortgage Loan Officers are the primary source of an appraisers business and can give you a referral to a good appraiser.



The appraised value less the eventual costs of selling (commissions and seller closing costs) equals the equity to be split between the parties. Unfortunately, we have seen often where the equity was split without taking into the cost of selling. This ends up costing the person retaining the home 6-10% of the home's value or $18,000-$30,000 on a $300,000 home.



With the divorce, your spouse may put a marital lien on the property or there may be a court ordered mandate for distribution of the equity, possibly including interest on the amount. This means if you are retaining the home, that you will likely have a specified amount of time to obtain funds needed to give the ex-spouse their portion of the equity. This can be done by cashing out the equity in the home with a new mortgage, selling the home or by using other assets you have to buy out their stake in the home. You will want the advice of a trusted mortgage professional.



If you are the one leaving the home, be sure that there is clear time lines for you to receive your portion of the euqity. You will also want to require that your name be removed from the mortgage note. A "Quit Claim Deed" does not remove you from financial responsibility, only from title. The person retaining the home will either need to refinance your name off of the mortgage or contact your current lender and ask to do a "qualifying name delete assumption".

If you would like additional information or have more questions you can contact me at lsandon@minnmortgage.com.