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Photo of Professionals at McCoy Fatula, APC

Addressing home equity in a complex California divorce

On Behalf of | May 20, 2024 | Property Division

The longer couples have stayed married, the more property they share with each other. They may then have a more challenging property division process ahead of them if they ever divorce. People tend to argue over how they divide their assets and debts at the end of a marriage. The more valuable assets become, the greater the likelihood of spouses struggling to address them in their divorce proceedings.

The home where they live together might potentially be their most valuable shared asset, and both spouses probably feel concerned about protecting their interest in the home. Under community property rules in California, each spouse deserves their share of the marital estate.

How can people address home equity in a California divorce effectively?

There are multiple solutions for sharing home equity

The first step that spouses need to take when figuring out how to divide home equity is to figure out how much equity they have accrued. To do that, they typically need to know what their home is currently worth.

Hiring an appraiser or a real estate agent helps establish the current fair market value of the home. People can then compare that with the principal balance due on their mortgage to determine how much home equity they currently have. Each spouse should receive their share of that home equity, and there are many ways to accomplish that goal.

Some spouses decide to sell their homes because they can then divide the revenue produced by the sale after paying off any remaining mortgage balance. They can then each use the proceeds of the sale to help establish themselves independently after the divorce. Other times, one spouse wants to stay in the marital home. They may refinance, and that process could involve withdrawing equity. That does increase the principal balance due and therefore the monthly payments on the mortgage. Additionally, spouses may use other assets from the marital estate or even marital debts as a way to adjust the property division settlement to account for home equity.

Any of these arrangements can be fair and appropriate depending on the goals of the spouses. In situations where spouses reach their own agreements about sharing the equity they have accrued, they can choose which of these approaches is best for them. When spouses litigate property division matters, a judge decides how to address the marital home and other marital resources.

Knowing what to expect when addressing home equity can help people preparing for a complex California divorce. Ultimately, community property rules protect the interest that each spouse may have in the home after investing in the home throughout the marriage.

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