Divorce proceedings in New Jersey often involve the division of marital assets, including the home and its equity. Home equity represents the difference between the home’s market value and any outstanding mortgage balances.
Couples going through a divorce have several options for handling home equity, each with its implications and considerations.
1. Sale of the home
A common option for handling home equity is to sell the property and divide the proceeds between the spouses. This approach provides a clean break and allows each party to move forward with his or her respective share of the equity. The sale of the home can be a straightforward way to ensure a fair and equitable distribution of the marital assets.
2. Buyout by one spouse
In situations where one spouse wishes to keep the home, he or she may choose to buy out the other spouse’s share of the equity. This involves refinancing the mortgage or using other financial resources to compensate the departing spouse for his or her portion of the home’s value. It allows one spouse to retain property ownership while providing the other with a financial settlement.
3. Equity offset in other assets
Rather than a direct division of the home equity, divorcing couples in New Jersey may opt for an offset arrangement. In this scenario, one spouse might receive a larger share of other marital assets, such as retirement accounts or investments, to offset the value of the home equity. This approach offers flexibility in asset distribution while still ensuring fairness.
4. Deferred sale with co-ownership
Some divorcing couples may choose to defer the sale of the home, especially if they have children. Co-ownership arrangements involve both spouses retaining an interest in the property until a specified future date or event. This option allows for stability in housing and can provide a familiar environment for children during a challenging time.
According to Forbes, 53.4% of people who ended their marriages in 2022 owned real estate. Choosing the most favorable option for dividing home equity requires open communication and a clear understanding of the implications for both parties.