Posted on March 12, 2024
house with calculator

A divorce client came into my Brentwood, TN office today and explained she wanted to keep the marital residence in the settlement.  She told me she had calculated the total amount of money paid towards the mortgage during the marriage and she wanted to pay her husband half of that amount for his equity buyout.  I explained that while her calculation was indeed one way to calculate the house equity owed her husband, her methdology did not consider the current value of the house or, the increase in the value of the house during the 7-year marriage or, several other factors.

I suggested another option to calculate the house equity and recommended she start with getting realtor comps for the marital residence.  While an appraisal is another option, I don't think appraisers are magic and why pay $600+ for an appraisal if she is not sure she is keeping the house?  By contacting a realtor and getting comps, she has a professional who can discuss the current housing market with her, interest rates and educate her about her options for refinancing.  After the comps are pulled and a realistic sale price is known, I suggested she subtract the current mortgage value, costs of sale and costs of known repairs to claculate a realistic equity value for the residence.

Next, I explained she needed to create a detailed budget to understand if she can really afford to keep and maintain the house.  Our budget worksheet with 140 items is quite thorough and will confirm what she can afford.

Finally, I explained she needed to understand if the joint mortgage can be assumed by her or, if she will need to refinance the current mortgage.  In summary, she had some work to do before we could really understand the house equity and her buyout options for the settlement.  I also explained that while her first methodology was an option, I did not feel it would provide a fair number for o potential settlement.  After some more discussion, she understood the benefits of the process we follow and agreed it was reasonable.

As demonstrated above, getting a financially smart divorce takes effort.  Our motto is "measure twice and cut once".  Seems to work well for our clients.


Posted in: Finances