Understanding the Role of Equity in Divorce Property Division
- Lisa McNally
- Jul 11
- 4 min read
When you’re going through a divorce, the home you shared isn’t just four walls and a roof—it’s one of your biggest financial assets. And within that asset lies something many people don’t fully understand: equity. Equity plays a central role in property division during divorce, but it’s also one of the most misunderstood concepts.
At Optimal Divorce Solutions, I help clients—especially in high-net-worth or gray divorce situations—understand what equity means, how it’s calculated, and how to ensure a fair split. Whether you plan to keep the home, sell it, or buy out your spouse’s interest, knowing the numbers is key to protecting your financial future.
What Is Home Equity?
Simple Definition
Equity is the current market value of your home minus the amount you still owe on the mortgage.
Equity = Market Value – Mortgage Balance
For example:
Home Value: $700,000
Mortgage Balance: $350,000
Equity: $350,000
This equity is often considered a marital asset—especially if the home was purchased during the marriage or marital funds were used to pay for it.
Why Equity Matters in Divorce Property Division
It’s One of the Largest Marital Assets
In many divorces, home equity is the single most valuable asset. That’s why it’s crucial to:
Get an accurate property valuation
Know the current mortgage payoff amount
Understand each party’s legal claim to equity
As a Certified Divorce Real Estate Expert (CDRE) and Licensed Real Estate Broker, I guide my clients through professional home valuation, appraisals, and strategic decision-making to protect their equity.
Equity Determines Buyouts and Settlements
If one spouse keeps the home, the other is typically owed half the marital equity—or another negotiated amount—depending on your state’s equitable distribution laws.
This could mean:
A cash buyout
An offset with other marital assets (retirement, cash, vehicles)
A deferred equity settlement (delayed sale)
Understanding the role of equity helps you negotiate more effectively and avoid costly missteps.
Common Misconceptions About Equity in Divorce
“We’ll Just Split It 50/50.”
That might not reflect:
Unequal contributions to down payments
Post-separation mortgage or maintenance payments
Separate property contributions (e.g., using premarital funds)
I help clients document financial contributions and determine what portion of the equity is truly marital versus separate.
“We Can Rely on Zillow for the Home’s Value.”
Online estimates are rarely accurate. A Comparative Market Analysis (CMA) or formal appraisal is essential.
“Whoever keeps the house gets the equity.”
Keeping the house doesn’t mean keeping all the equity. If you keep the home, you may owe your spouse their share unless otherwise agreed.
How to Accurately Calculate Equity
Determine the Fair Market Value (FMV)
Hire a licensed appraiser or request a CMA from a real estate professional.
Subtract All Liens and Debts on the Property
First mortgage
HELOCs
Tax liens (if any)
Adjust for Sale Costs (if selling)
Agent commissions
Closing costs
Repairs or staging expenses
Identify Separate vs. Marital Equity
Did one party own the home before marriage?
Was a premarital inheritance or gift used for the down payment?
This deeper analysis is often required in high-net-worth or long-term marriages, where the financial trail is more complex.
Options for Dividing Equity During Divorce
1. Sell the Home and Split the Proceeds
Simplifies the division
May result in capital gains if significant appreciation occurred
Ideal if neither spouse can afford the home independently
2. One Spouse Buys Out the Other
Requires refinance or use of other marital assets
Important to review post-divorce affordability and credit qualifications
I help clients assess refinancing scenarios and affordability in today’s real estate market
3. Delayed Sale or Co-Ownership
Often used when minor children are involved and stability is prioritized
Must define terms clearly: timeline, maintenance costs, sale terms, exit strategy
Tax and Real Estate Considerations
As a Certified Divorce Financial Analyst (CDFA®) and CDRE, I support clients in understanding:
Capital gains exclusions (up to $250k/person)
Mortgage refinancing rules
How real estate choices impact future lending, equity growth, and liquidity
In states like New Hampshire or Maine, market timing and seasonal home values can also affect how and when you divide property. I factor these variables into each client's strategy.
Key Takeaways:
Equity is your home’s value minus what you owe—and it's often a major marital asset
Accurate home valuation is essential; don’t rely on online estimates
Equity can be split through sale, buyout, or deferred sale arrangements
It's critical to distinguish marital vs. separate equity when negotiating
Professional financial and real estate guidance prevents costly mistakes
If you're facing decisions around your home or real estate assets in divorce, don’t guess your way through it. Let’s build a plan that protects your financial future and positions you for long-term stability.
Schedule your free 30-minute consultation today to talk through your equity options with clarity and confidence.
Lisa McNally
Certified Divorce Coach | Certified Divorce Mediator
Certified Divorce Financial Analyst (CDFA®) | Certified Divorce Real Estate Expert (CDRE)
Licensed Real Estate Broker (NH & ME)
Founder, Optimal Divorce Solutions
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