Issues to consider when buying out a home in divorce
For many estranged couples who are going through a divorce, their home is the largest asset that needs to be split. Deciding who gets to live, own, or make payments on a home can be a very difficult and emotional issue, especially when there are children involved. There are many different choices that can be made, including co-ownership or buying out the other spouse. California is a community property state which typically means that a spouse keeping the house will owe the other party half the equity.
The optimal way to determine this value is to hire a professional appraiser. Owners can also get a comparative market analysis or a broker price opinion if they want to save some money. Once a value is determined, any mortgage balance and liens are subtracted from that number to calculate how much equity the couple actually has in the home. A separate property contribution, such as a down payment made with money earned before marriage, may also be considered when determining how much is owed.
When one party buys out a house from the other, they may have the option to apply other assets to what’s owed and even refinance the existing loan prior to the divorce being finalized. The party refinancing in their own name only will need to make sure they qualify for the new loan on their own, as alimony and child support will generally not be considered by the lender.
People trying to decide how to split a house during the end of a marriage have the right to support and guidance from an attorney. A lawyer will carefully go over the terms of an agreement with their client to find out if the division is in their best post-divorce interests.