Many married couples in Ohio choose to buy houses together. Instead of paying rent every month, they slowly accumulate home equity. A standard mortgage has a 30-year term, which means that owners spend three decades paying off the principal balance and interest on the loan to become the unencumbered owners of the property.
Whether spouses have accumulated two years or two decades of home equity during a marriage, the value accumulated in their home may be one of the biggest contributing elements to the overall marital estate.
How can spouses work to ensure a fair outcome when addressing home equity during a divorce?
Knowing what the house is worth
The first step toward a reasonable arrangement for the marital home is to establish its current fair market value. Real estate prices fluctuate drastically over time and may appreciate significantly between when spouses buy the home and when they divorce. Many couples have to either work with an appraiser or a listing agent to accurately estimate the value of the home at the time of the divorce.
Finding ways to split equity
There are multiple ways for spouses to ensure that each of them receives an appropriate portion of accumulated equity. For some couples, the simplest solution is to sell the home. They can then each take a portion of the sale proceeds as a nest egg for rebuilding after the divorce.
Frequently, one spouse chooses to stay in the marital home, while the other leaves. The spouse staying likely needs to refinance. They can withdraw equity as part of that process to compensate the other spouse.
The spouses also have the option of negotiating other property division terms to balance the proverbial ledger. Business holdings, investments and retirement savings accounts could all help offset one spouse’s share of home equity. Taking on responsibility for more marital debt can also be part of that arrangement.
People trying to address their most valuable assets often need to think critically about their circumstances and whether retaining their home is a reasonable goal. Identifying key divorce priorities, such as staying in the marital home or securing an appropriate amount of equity, can help people better ensure a fair outcome and rebuild their lives after the end of a marriage.