Divorce and Your Home: 4 Blind Spots to Watch Before Signing a Final Settlement

If you’re going through a divorce, deciding what happens to the family home can be one of the biggest financial decisions you’ll make.

Before signing your Divorce Decree or Marital Settlement Agreement, make sure you understand these four potential blind spots.

1. What Is the Home Really Worth?
The value of your home affects how much equity you may have to divide. Online estimates from sites like Zillow may not be enough and can be inaccurate.

 A professional appraisal can provide a more reliable estimate of value—but make sure the appraisal is current and reflects the property’s actual condition. Check your apparisal to determine if the appariser's value is based on the "AS IS" condition of your home or "SUBJECT TO" certain required repairs. 

The most accurate value estimate will be as close to the time when the defendant spouse is served and notifified legally of the Divorce proceeding.  

2. Don’t Forget the First Mortgage
If one spouse plans to keep the home and buy out the other, simply agreeing that one spouse will “take over” the mortgage does not necessarily remove the other spouse from the loan.

You may need to refinance or qualify for another mortgage solution.

If your settlement depends on one spouse refinancing — make sure your home lender has approved your loan before the decree locks in a refinancing deadline you may not be able to meet. This mistake can cost additional fees and costs. 

 The Decree may direct one spouse to "Refinance or Sell” the marital home, but this is not sufficient protection. The Decree or Settlement should contain an actual deadline for completing the refinance- like within 6 months.

3.  What About the HELOC?
A Home Equity Line of Credit (HELOC) is easy to overlook. Typically a Home Equity loan is a second mortgage on the property.

The outstanding balance reduces the equity available to divide and may also affect whether the spouse keeping the home can qualify for new financing. Be sure the payoff of the HELOC balance is included in your calculations and is accurate. 

Confirm certain HELOC items, like:

-is the HELOC frozen so neither party can draw from the line before the Decree is signed

-Is the HELOC currently in one spouse's name  or both spouses

- Who will  be responsible for the monthly payment of the HELOC loan before settlement is agreed to.  

4. Get the Buyout Numbers Right
A spouse buyout should be based on more than just the home’s value. Consider the appraised value, first mortgage balance, HELOC balance, and any other agreed-upon credits or adjustments.

Are there upcoming "major" repairs required in the near future that should be considered in determining net equity? Forexample, is the air conditioning system close to end of life, roof replacement, or a water heater requiring replacement. These items can be costly and should be negotiated in the final buy out number before signing the Decree. 

Thinking About Keeping the Home After Divorce?
Before you agree to a spouse buyout or sign your Divorce Decree, our experienced Arizona Team can guide you through the options for refinancing and buying out the spouse.

 We can help you understand your home’s value, current mortgage, HELOC, potential buyout amount, and financing options—so you can make an informed decision about what comes next.

An educated home owner will make wise financial decisions.