It is quite common for married couples to invest heavily in the homes where they live together. Between what they pay toward the purchase of the property and any improvements they make to the home, the house where a married couple lives together could be the most valuable asset in the marital estate.
When couples divorce in Minnesota, they usually share the equity they have accrued in the property with one another. The following are some of the ways for spouses to divide home equity in Minnesota divorce.
Selling the home
One of the most efficient solutions for converting home equity to liquid capital is to sell the property to new owners. The proceeds from the transaction allow the current owners to pay any remaining principal balance on their mortgage. They can then divide what remains. The decision to sell the marital home can lead to a relatively fast and transparent division of home equity in a divorce.
Offsetting equity with other assets
Couples may have invested in stocks or set aside capital to ensure their comfort during their golden years. The home where they live together is not the only high-value asset they may share with one another. Some spouses negotiate arrangements where one spouse keeps the home and the equity in it while the other receives other assets worth a comparable amount. The debts owed by the couple could also factor into this process. Someone who keeps the home might also accept a greater portion of the marital debt in addition to giving up other marital property.
Refinancing the property
In the scenario where spouses do not have other assets that have an equivalent value to the home, the simplest solution for addressing home equity might involve refinancing the mortgage. The spouse who keeps the home after the divorce secures a mortgage in their own name. They can withdraw some of the equity from the property as part of that transaction to buy out their spouse. The solution can be a viable option in cases where one spouse has good enough credit and high enough income to afford not just the original loan amount, but also the increased principle that comes from withdrawing equity to reimburse a spouse.
Coming up with a mutually agreeable solution for home equity can help spouses manage the property division process more fairly and effectively. Those who are flexible about property division terms in some areas of the process may have an easier time achieving certain goals in others.