Few things are as gut-wrenching and stressful as a divorce. Adding home buyouts into the picture doesn’t do either side any favors. To help you better navigate this difficult time, we’ve put together this guide to buying out a home in a divorce.
When you’re in the throes of a divorce, a real estate transaction is likely the last thing you want to deal with. As emotions run high and legal paperwork piles up, adding a home buyout to the stress machine can feel like the straw that’s going to break the camel’s back and send you up the wall.
Thankfully, taking full ownership of your home from your ex doesn’t have to be a logistical nightmare. As long as you educate yourself on the buyout process and work with an experienced real estate agent who can answer your questions along the way, taking possession of your home can be easy and stress-free.
In the meantime, let’s look at what it means to buyout a home and how your wallet will fare after the fact. Take a deep breath, put on Gloria Gaynor, and read on.
What does “buyout” in a divorce mean?
Many married couples own a home together. When they get divorced, one spouse may want to continue living in the house. To do so, they can buyout the other spouse’s equity to take full possession of the home.
Buying out the home you’ve been living in can add some stability to an otherwise tumultuous period of your life. If you have kids, staying put can help them better adjust to the familial changes, as they won’t have to switch school districts, make new friends, and adjust to a new neighborhood. Overall, a home buyout can be beneficial to families going through divorces, so long as it’s financially viable.
How is a home buyout calculated in a divorce?
In order to buyout your ex’s equity, you’ll first need to figure out how much they have. To do so, start by getting your home appraised. This will give you a very accurate estimate of the home’s fair market value.
Once you’ve determined the value of your home, subtract the amount you owe on your mortgage from your home’s value and divide the result by two. This will tell you how much equity each of you has. Let’s look at an example to make this clearer.
If your home is valued at $400,000 and the two of you owe $200,000 on the mortgage, subtract $200,000 from $400,000. Combined, you both have $200,000 in equity. Now, divide that number in half to get the amount of equity you each have: $100,000.
To determine how much you must pay to buyout the house, add their equity to the amount you still owe on your mortgage. Using the same example, you’d need to pay $300,000 ($200,000 remaining balance + $100,000 ex-spouse equity) to buyout your ex’s equity and take ownership of the house.
How do you buy out a house in a divorce?
You have two options: pay the remaining balance and equity in full in cash, or refinance your mortgage. For most people, the latter will be preferable.
In this situation, refinancing means taking out a new mortgage to cover both the remaining mortgage balance and your ex’s equity. Continuing with the example from above, this would mean you’d need to take out a $300,000 loan.
Alternatively, you can buy your ex’s share of the equity straight out if you have enough cash on hand — $100,000, in this case. If you have the wherewithal, you can buy your partner’s share of the equity and pay off the remaining mortgage balance at the same time to settle the ownership once and for all.
3 Tips When Splitting Up Property In a Divorce
Now that you know the basics of home buyouts, let’s look at three pro tips that can help make the process move along more fluidly.
1. Get Help from an Experienced Professional
All real estate transactions are subject to complications, loads of paperwork, and unforeseen pitfalls. Working through your home buyout with an experienced professional can help ease the burden at the point in your life when you’re likely most vulnerable — the middle of your divorce. A lawyer or real estate agent will answer your questions and guide you through the buyout process with ease.
2. Do Your Homework
Reading this article is a good start, but you’ll want to make sure you understand home buyouts backwards and forwards before you set out to do your own. Make sure that you’re aware of how your purchase will impact you down the road and budget accordingly. It’s a good idea to read up on mortgage refinancing so you understand all the options available to you.
3. Try to Keep Things As Civil As Possible
Real estate transactions are hard enough without a divorce thrown into the mix, and divorces are hard enough without real estate transactions thrown into the mix. Putting the two together makes for a hazardous combination.
Homes carry a lot of emotional value and navigating both a divorce and a home buyout will not be easy for you or your ex. To help keep things moving as smoothly as possible, try to remain civil. It will be nigh on impossible to buyout your ex’s equity if you’re not on speaking terms or can’t quiet your quarrels.
As hard as divorces can be, keeping the house need not add to the stress of your split. With research and the helpful hand of a skilled real estate agent, you can buyout your home without taking another five years off your life.
If you need some guidance as you navigate this difficult part of your life, Clever can help. Get in touch with us — we’d be happy to answer any questions you have and steer you in the right direction. Just fill out our form and we’ll reach out to you to schedule a free, no-obligation consultation with one of our experienced Partner Agents.
Top FAQs About House Buyouts in a Divorce
1. Can a divorced couple own the same house?
A divorced couple can own the same house but not in exactly the same way as when they were together. Married couples that own a home together are considered tenants by the entirety, which means they each have 100% equity in the house. However, once the divorce is settled, they are re-designated as tenants in common and each partner gets a 50% share of the equity.
2. Do I have to refinance after a divorce?
Not necessarily. If you want to remove your spouse’s name from the mortgage, you can ask your lender if they’ll grant you a release of liability. This will remove your spouse’s name from the mortgage and cancel their obligations to pay the debt. If the lender refuses, refinance the mortgage. This means you must reapply for the loan using only your own income and financial assets.
3. How is the value of a house determined in a divorce?
The value of a house is determined the same way in a divorce as outside of a divorce. A professional appraiser will inspect your home and make an estimate of its fair market value based on its condition and how it compares to other similar homes in the area. The marital status of the owners has no effect on the home’s valuation.
4. Can I stop paying my mortgage after a divorce?
You are required to continue making mortgage payments as long as your name remains on the mortgage. To remove your name, you can ask your lender for a release of liability. If they refuse, your spouse will need to refinance the mortgage under her name only. This means she must re-qualify using only her financial assets.
5. Can you be forced to sell your house in a divorce?
If your ex-spouse is still an owner of the property, they can file a partition lawsuit against you which will force you to sell it. The lawsuit will be brought before a court, and if the ex-couple can’t agree on how to split up the house, the court can force you to sell the property. To avoid this, it’s best to remain on civil terms and discuss splitting the house outside of the courthouse.