How to Figure Home Equity in a Divorce

by Beverly Bird
Determining equity tells you what funds you and your spouse can share post-divorce.

Determining equity tells you what funds you and your spouse can share post-divorce.

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Equity in assets is a crucial part of property division in a divorce and the marital home is often a couple's most valuable asset. Most state laws require a home's equity to be determined by appraisal as part of the divorce process. It's important to identify equity because each spouse is entitled to a share of it as part of property division.

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Step 1

Select a licensed real estate appraiser who has experience appraising homes for divorces. You and your spouse can use one appraiser and split the cost, or each of you may hire your own and get two appraisals. Although it may be tempting to just use your home's tax-assessed value or have a real estate agent do a comparative market analysis, these choices won't hold up well in court if you and your spouse end up disputing the value of your home at trial. What's more, comparative market analyses often come in high -- and in many areas, tax-assessed values have little relation to market value.

Step 2

Determine the extent of all liens against your property. This might include the mortgage, home equity loan or other lines of credit secured by your home. It might be worth it to have a title search done as well. There may be liens against your property you don't even know about, for example, if someone got a judgment against you. When you've gathered documentation confirming the balances of all liens, add them up.

Step 3

Subtract total liens from the appraised value of your home. This is your equity, and you have a few options for dividing it if one of you is going to retain the home. You can refinance the mortgage for enough money to satisfy the existing mortgage plus half of the equity, so you can pay off your spouse's interest. You could also offset your spouse's share of the equity by relinquishing to him other marital assets of comparable value, or the two of you might agree that you'll make a cash payment to him over time.