At a glance | How to buy someone out | Alternatives | FAQs
A buyout is a common way to split a jointly owned home in a divorce. During a buyout, one spouse will offer to buy the other spouse’s portion of home equity. That could be with cash, investments, or other assets.
- A divorce house buyout is when one spouse decides to buy the equity of another in order to continue living in their home.
- Buyouts are ideal when one spouse wants to live in the home, while the other would like to cash out their equity and move on.
- If a buyout isn’t a viable option, then you and your spouse could agree to sell the home and split the proceeds or co-own the house for a period of time.
At a glance: What can I do with my house after a divorce?
|Option||What are the costs?||When should you do it?|
|One spouse buys the other’s equity (learn more)||Share of equity + closing costs*||One spouse wants to stay, the other wants to cash in on equity and move out|
|Sell and split the proceeds (learn more)||Closing costs*||Both spouses want to cash in on equity and move out(could be judge-mandated)|
|Co-own the house (learn more)||Homeownership expenses||Market conditions are slow, both spouses can wait to sell for higher|
We don’t give legal advice! Before you start the buyout process, talk to an attorney. They can help you legally navigate through these tumultuous times and take the right steps toward a fair and equal resolution.
How to buy someone out of a house
You can buy out your spouse’s equity in two ways:
To buy someone out of a house, you’ll first need to figure out how much equity you have in the house. Equity, or the percentage of your home that you actually own, is the difference between what you owe on your mortgage and your home’s appraised value.
|Equity = fair market value – outstanding mortgage balance|
1. Calculate a home buyout
- Figure out how much your home is worth. Ask a realtor to provide a CMA, order an appraisal, or get a free home value estimate now!
- Determine how much you still owe on your mortgage. You can ask your mortgage lender for a payoff statement.
- Calculate your total equity. Subtract the amount you still owe on your mortgage from the home’s appraised value.
- Divide the equity in half. This will give you your buyout number.
2. Buy your spouse’s equity with cash
If a cash buyout isn’t possible, you could negotiate with other assets, such as a shared brokerage account or other investments.
🤔 Does the seller get taxed?
No. As long as the sale is a part of the divorce, the selling spouse will not pay a capital gains tax on the equity they sell.
If there’s not enough cash or assets for a straightforward buyout, refinancing the mortgage could get you the funds to pay back the home’s total equity.
3. Refinance the mortgage
The buying spouse will often need to refinance the mortgage after a divorce anyway. The lender may want to re-evaluate their credit and income for loan eligibility.
Refinancing a mortgage helps the selling spouse by:
- Remove them from the loan,
- Untying the mortgage from their credit report, and
- Eliminating their responsibility in paying it off
Refinancing can be stressful for the buying spouse, though. They’ll need enough income to:
- Requalify for a mortgage
- Cover homeownership costs, after paying for essentials (a.k.a. residual income)
- Cover associated closing costs, unless the ex-spouses negotiate another arrangement
Alternatives to buying someone out of a home
Sell and split the proceeds
If neither spouse can afford a buyout, you could sell the home and split the proceeds. Dividing the equity 50/50 could be the best option if two spouses can’t decide how to split a home, since both parties get an equal share.
✅ It can a good idea because:
Neither spouse will earn or lose more equity. Plus, you can negotiate the exact split (50/50, 60/40, etc.) as part of the divorce proceedings and settlement.
Selling could help both parties move. Emotionally, selling the home together could mean closing a chapter and moving on.
❌ It’s risky if:
The location is important. For example, your children need to attend school in a certain district. Or the home is near a spouse’s job and they’d like to remain close to work.
You’ve owned the home for less than a year. You might not have enough equity built into it to pay for closing costs and mortgage fees.
Co-own the home
You could also continue owning the house together, at least until market conditions improve for sellers. This could give them more time to figure out what they want to do with the home, or it could give one spouse time to save money in order to buy out the other.
✅ It’s a good idea if:
Continuity is important. Stability could be essential if you have children, or you just need some certainty in your life to undergo the complications of a divorce.
You’d sell for more later. If the real estate market has taken a downturn during your divorce, selling right away could mean taking a loss. Waiting for the right time to sell could get you a bigger payout.
❌ It’s risky because:
Housing costs are hard to split. You and your ex-spouse will still need to split mortgage payments, utilities, insurance, and property taxes. This can prove extremely difficult, especially if you’re not on friendly terms.
Your credit score could be affected. If you and your spouse’s names are on the mortgage, then you’ll both be responsible for paying it in full and on time. One late payment could hurt both your credit scores.
FAQs on divorce buyouts
Does a spouse have to agree to a buyout?
Yes, a buying spouse can't force a selling spouse to give up their share of the home, neither will a judge force one spouse to accept the buyout of another.
Can you sell a home if one partner refuses?
If your partner is a co-owner, or you have a joint mortgage, then you can only sell with their permission. Alternatively, a court can order the sale of a home, if spouses can't agree what to do with it.
How Can I Sell My House Fast Without Losing Money? Need to sell your house fast? Here’s how to do it WITHOUT losing money or getting ripped off.
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