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Addressing home equity in a North Carolina divorce

On Behalf of | Jul 6, 2024 | Divorce

Spouses tend to work together to accrue resources for their future financial comfort. Buying a marital home together is a perfect example of this practice. Spouses make sacrifices and commit huge amounts of their income for the acquisition and maintenance of their primary residence.

They may spend three decades working to pay off that mortgage. The home equity that they build by making payments on the mortgage and improvements to the property contributes to their personal wealth. Many spouses thinking about divorce in North Carolina worry about how ending a marriage might impact their homeownership and home equity.

What happens to accrued home equity in a North Carolina divorce?

Spouses have to share the equity they accrued

Both spouses have probably made sacrifices related to their homeownership. Typically, they have an obligation to equitably or fairly divide the equity that they have accrued throughout the marriage. That can occur in several ways.

If one spouse continues living in the marital home after the divorce, they likely have to compensate their spouse for a fair portion of the home equity. Each spouse may need to consider carefully whether staying in the home is the right option for them. Factors including income and custody arrangements can influence which spouse stays in the home.

In some cases, one spouse refinances the home to withdraw equity and compensate the other. It is also possible to use the value of other assets to offset the value of the marital home when divorcing. Occasionally, spouses agree to sell their home because that is the most expedient solution for splitting their equity with one another.

The terms that the courts might set for property division are possible to predict. Equitable distribution rules leave much to the discretion of a judge and can result in uncertainty about the final terms. Many people prefer to try to negotiate a settlement where they have control over the terms rather than taking the matter to family court where a judge makes all of the major decisions.

Learning the basics of equitable distribution and thinking carefully about personal circumstances can help people as they prepare for property division negotiations. Understanding what happens with high-value assets can help people feel more comfortable about moving forward with a divorce in informed ways.