The residence where a married couple lives may add significantly to their overall personal wealth. For many families, a home is their most valuable asset. They may invest a significant portion of their income into maintaining the home. They may expect to use that wealth when they retire or as part of their legacy after they die.
If a married couple decides to divorce, they may have to split their home equity as part of that process. Those with valuable personal holdings often worry about the practical implications of a divorce. What typically happens to home equity when couples divorce?
Couples typically share home equity
The marital income invested in the home is subject to division in a Virginia divorce. The courts expect couples to focus on a fair or equitable property division settlement. The equitable division of home equity often requires a creative solution.
In some cases, one spouse refinances the mortgage and withdraws equity to provide direct financial compensation to the other. That solution may not work in every case. Sometimes, spouses have to use other valuable marital property to offset the overall value of the marital home. Business holdings, investment accounts and retirement savings can potentially help offset the economic value of the marital home.
Occasionally, the most efficient solution is to sell the home. Neither spouse can afford it on their own, or they simply don’t have much equity accrued. In such scenarios, selling the property and dividing the proceeds can be an appropriate solution.
Spouses have the option of negotiating their own arrangements as long as they both agree that the terms are fair. Otherwise, they may need to take the matter to family court. A Virginia judge can review the financial circumstances of the spouses and decide on a specific way to divide their property that seems fair and equitable. Typically, even if one spouse stays in the marital house, the other should still receive a reasonable portion of the equity they have accrued in the home.
Learning about what happens during property division proceedings in a Virginia divorce can take some fear out of a decision to file. Spouses who understand state property division rules may feel more confident about pursuing a divorce. They can use what they know to negotiate an appropriate settlement if they hope to arrange an uncontested divorce instead of litigating.
