How a Home With No Equity Affects a Divorce

While “’til death do us part” certainly may be a nice sentiment, marriages don’t always work out that way. When you’re divorcing, dividing financial assets can be a major source of stress… and in no situation is that more apparent than when you sell your home.

How is home equity split in a divorce? In an ideal situation, you simply sell the house and split the equity equally. After all, if you’re both responsible for the mortgage, you both should receive some equity.

But maybe the market has hit rock bottom and you’re underwater. Maybe your mortgage balance and your home’s value are equal. What happens to your house in divorce with no equity?

Read on to learn more. 

How to Determine Equity in Home Divorce Settlement

Before taking any other steps, you must determine your home’s value. That means getting an appraisal

Some states require an appraisal by law, others do not. Either way, you need an appraisal to determine how much your home is worth.

If you’re trying to reach a marital settlement agreement, the court will need to know exactly how much each asset is worth… including your home. 

Bottom line: Whether you’re negotiating a settlement or considering selling, you need accurate numbers to work with.

If You Have Equity, How is it Split in a Divorce?

Often, equity is simply split in half. For example, if there’s $50,000 in equity, each spouse receives $25,000.

But maybe the home was acquired before or after the marriage, as an inheritance, or as a gift to just one spouse. Or perhaps one spouse contributed more money toward the house.

In cases like these, couples may agree to an uneven split. Unfortunately, there’s no such thing as an easy house equity split calculator so be prepared to do some math.

Dealing With Negative Equity

Also known as “being underwater,” negative equity means that your home’s value is less than the balance you owe on your mortgage. 

If the negative equity is minimal, you may be able to sell your home then pay the difference at closing. In such cases, it might make sense to raise the selling price while lowering closing costs to make up the difference.  

You may also consider a short sale, in which the mortgage lender agrees to accept less than the full payoff amount, but will still consider the debt paid in full. Unfortunately, such deals tend to take a long time, which isn’t ideal in a divorce.

Selling a House in Divorce with No Equity

If your home isn’t underwater but has no equity at all, the simplest solution may just be to sell it and walk away. This way, your mortgage is satisfied and you don’t have to figure out who will pay which part of the debt. 

Alternately, one spouse could keep the home and refinance the mortgage in (solely) their name. In most cases, this approach tends to equalize property and debt division, as the spouse that takes the home is getting an asset, but they’re also taking on the associated debt.

What to Do Next

In most cases, if your home has no equity, it just makes sense to sell and walk away. But no matter how much (or how little) equity is in your home, once you decide to get divorced and sell you’ll want to do it fast. 

HomeGo will take care of your home sale quickly and easily, minimizing your stress. You won’t even have to worry about listing your home, let alone paying commissions and fees. HomeGo will purchase your home as-is so you don’t have to waste time and money with repairs and upgrades.

When you’re going through a divorce, the last thing you need is more stress. Let HomeGo make it easier so you can move on quickly and confidently.

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