When One of You Wants to Keep the House

Are you and your ex still working out your property settlement? Do you co-own a house that one of you wants to keep?  If so, someone has to buy out the other. And that’s when the fun begins. The end result is simple enough:  the spouse keeping the house pays the other an amount equal to the departing spouse’s interest in the property.

But that leads to a series of questions:  How much is the house worth? If both parties agree, no problem. If not, you’ll need a professional appraiser, or perhaps you’ll each hire your own.

Once a value is established, how much equity is in the house? That’s a simple equation of subtracting the outstanding mortgage balance from the value. So the spouse who’s staying just pays half of the equity amount to the one who’s leaving, right? Not necessarily. There may be a prenuptial agreement, one party may have contributed separate property to the down payment or mortgage on the house, or perhaps done physical labor toward improving the property.

And then, where does the embedded spouse get the cash to pay off his or her ex? According to this piece, that very often comes from refinancing the property. Additionally the article has more details on the buy-out process.

Of course, some experts think it’s a mistake — often driven by emotion — for one of the parties to keep the house. Check out this previous post.